Markets recover after lackluster start to year

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Associated Press

Posted on January 6, 2014 at 10:03 AM

Updated Tuesday, Jan 7 at 10:09 AM

LONDON (AP) — Stock markets turned higher on Tuesday, recovering from a rocky start to the year, despite concerns over the Chinese and U.S. economies.

Markets started the new year in lackluster fashion, especially compared with their stellar performance in 2013, after surveys indicated a slowdown in Chinese manufacturing and the U.S. services sector, two key parts of the world's two largest economies. That made investors cautious ahead of more indicators this week, particularly Friday's closely watched U.S. jobs report.

"What we've seen so far this year is most likely just a case of profit taking rather than anything else," said Craig Erlam, market analyst at Alpari. "That said, it has been accompanied by a number of disappointing economic releases, not just in the U.S., but also in other major economies."

Britain's FTSE 100 stock index was up 0.4 percent at 6,757.67 while Germany's DAX was 0.6 percent higher at 9,481.91. France's CAC-40 was up 0.5 percent at 4,246.51.

In Europe, a drop in inflation kept alive the possibility that the European Central Bank might further loosen its monetary policy in coming months, though few expect it to act at its meeting on Thursday.

"While the ECB may refrain from providing additional policy support on Thursday, we expect further action in the months ahead," said Ben May, analyst at Capital Economics.

Wall Street rose on the open, recovering from a three-day losing streak, its worst start to a year in almost a decade. The Dow gained 0.6 percent to 16,523.20 while the S&P 500 was up 0.5 percent 1,835.51.

The most closely watched economic report of the week will come on Friday, when the Labor Department is scheduled to release its jobs survey for December. That's going to influence the Fed's decision on how fast to reduce its financial asset purchases in the coming months. The Fed announced in December that the labor market has improved enough that it will begin reducing its $85 billion of monthly purchases, starting with a $10 billion reduction this month.

The money created by the stimulus over the past few years has been designed to try and keep long-term interest rates low.

Before then, the minutes to the Fed's last meeting, in December, will be released on Wednesday and scrutinized for clues on the policymakers' thinking.

Earlier, Asian markets closed lower, with Japan's Nikkei 225 down 0.6 percent at 15, 814.37.

Hong Kong's Hang Seng added 0.1 percent to 22,712.78 while China's Shanghai Composite Index gained 0.1 percent to 2,047.32 after the government said it would allow the creation of five private banks to support economic growth and competition.

In currencies, the euro was flat at $1.3622 while the dollar rose 0.4 percent to 104.58 yen.

The benchmark oil contract for February delivery was up 18 cents a barrel to $93.61 in electronic trading on the New York Mercantile Exchange. The contract fell 53 cents to close at $93.43 on Monday.

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