US consumer confidence survey weighs on stocks

LONDON— An unexpected decline in a closely watched gauge
of U.S. consumer confidence and further depressing housing data weighed on
stocks Tuesday though holiday-thinned trading kept the selling in check.

The Conference Board reported that its main consumer
confidence index fell to 52.5 in December from an upwardly revised 54.3 the
previous month amid ongoing concerns over jobs. The decline was unexpected —
the consensus in the markets was for the index to push up to 56.

Further disappointment came with the news that house
prices in 20 U.S. cities all fell in October, according to a survey from
S&P/Case Shiller.

Though stock markets in both Europe and the U.S. pushed
lower following the downbeat economic data, the response was fairly muted given
light trading volumes — New York trading was additionally impacted by the heavy
snowstorm over the past couple of days.

In Europe, France’s CAC-40 closed down 3.47 points at
3,858.72 while Germany’s DAX eked out a gain of just over a point to 6,972.10.
British markets were closed for a holiday.

In the U.S., the Dow Jones industrial average was down
less than a point at 11,554.38 around midday New York time, while the broader
Standard & Poor’s 500 index fell less than a point to 1,257.22.

Aside from the state of the U.S. economy, investors
continued to evaluate the effects of China’s decision over the weekend to raise
its key interest rate by a quarter of a percentage point to 5.81 percent — its
second increase in just over two months.

The Chinese monetary authorities are getting increasingly
fidgety about rising prices and the hope is that higher borrowing costs will
rein in inflation, which spiked to a 28-month high in November of 5.1 percent.

However, higher interest rates could well dampen down
economic growth. That’s important for the world economy, because China has been
a key motor over the past couple of years.

The surprise decision continued to weigh on Chinese
stocks, and the Shanghai Composite Index fell 1.7 percent to close at 2,732.99,
while Hong Kong’s Hang Seng index shed 0.9 percent to end at 22,621.73,

Japan’s benchmark Nikkei 225 stock average declined 63.36
points, or 0.6 percent, to finish at 10,292.63 amid renewed worries over a
strengthening yen — a higher yen makes it more difficult for Japan’s exporters
to compete in international markets.

For the third straight day, Japanese officials, including
finance minister Yoshihiko Noda voiced their worries about the yen’s strength,
which has seen the currency rise to near seven-week highs against the dollar.

As a result, investors will be on the lookout for any
actual intervention in the markets by the Japanese authorities. In September,
the Bank of Japan bought dollars and sold yen for the first time in six years
in the hope of putting a ceiling, at the very least, on the yen appreciation.

By late afternoon London time, the dollar was down 0.6
percent at 82.21 yen.

Eric Viloria, an analyst at Forex.com, doubts that
“bold action” will be taken by Japanese policymakers anytime soon
given recent positive economic data and stock market gains. However, he said
the risk is a deterioration in production and exports will weigh on Japanese
stocks and economic growth and that could trigger a reaction by policy makers.

Meanwhile, the euro was volatile all day, falling from a
high of $1.3270 to $1.31.

Benchmark oil for February delivery rose 28 cents to
$91.28 in electronic trading on the New York Mercantile Exchange.

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