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Global stocks battered again as US economy fears, European debt problems spook investors
BRUSSELS (AP) ' Concerns over the U.S. economy and Europe's debt problems hit stocks around the world, although Japanese shares were buoyed by the Bank of Japan's latest intervention to stem the rise of the yen.
Later Thursday, investors will listen closely to European Central Bank President Jean-Claude Trichet's comments on the European debt crisis after the bank decided to keep its main interest rate on hold at 1.5 percent. In particular, they will be interested to see if the ECB is prepared to contain a recent sell-off in Spanish and Italian bonds.
In Europe, Germany's DAX was down 1.1 percent at 6,566 while the CAC-40 in France fell 1.2 percent to 3,415. Britain's FTSE 100 was 1.7 percent lower at 5,487.
Wall Street was set for a lower open with Dow futures down 0.9 percent at 11,707 and S&P 500 futures dropping 1.1 percent to 1,240.3.
"With nerves frayed following this week's plunges it could well be another volatile session ahead," said Will Hedden, a sales trader at IG Index.
Among major stock markets, only Tokyo's Nikkei 225 index actually traded up 0.2 percent to 9,659.18 after the Bank of Japan intervened to sell the yen and buy the dollar. That drove the dollar near 80 yen Thursday from 76.99 late Wednesday.
Japanese Finance Minister Yoshihiko Noda said financial authorities decided to intervene in the currency markets because the strong yen could hurt the country's export-dependent economy and slow its efforts to recover from the March 11 earthquake and tsunami.
The dollar had fallen as low as 76.29 yen on Monday. It hit a record post-World War II low of 76.25 yen in the days following the March 11 earthquake and tsunami.
A strong yen is painful for Japan because it reduces the value of foreign earnings for companies like Toyota Motor Corp. and Nintendo Co. and makes Japanese goods more expensive in overseas markets.
The intervention was coupled with monetary policy easing by the central bank's board. The bank expanded an asset purchase program to 50 trillion yen ($638.3 billion) from 40 trillion yen. It also kept its key interest rate in a range of zero to 0.1 percent.
Japan's moves came only a day after the Swiss National Bank intervened to slow a rise in the Swiss franc, another currency perceived as a save-haven at a time investors are fleeing risky assets such as shaky European government bonds.
Investors have been looking for safe havens to park their cash after figures earlier this week pointed to a dangerous slowdown in the U.S. economy at a time when Europe's debt problems appear to be engulfing big economies like Italy and Spain.
Yields on Spanish and Italian bonds stabilized Thursday, still much higher than just a month ago but further away from the 7-percent level generally seen as a nation's breaking point. The yield, or interest rate, Italian 10-year bonds was 6.1 percent, while its Spanish equivalents were at 6.2 percent.
There was chatter in the markets that perhaps the ECB was once again buying up distressed government bonds, a practice it had abandoned earlier this year amid frustrations over the eurozone's reluctance to adopt a more ambitious crisis strategy.
The currency union's leaders in July decided to let their bailout fund take over that role, as the ECB had demanded for months, but the changes to the fund may take weeks to implement, leaving the eurozone without preventive tools just as the crisis reaches its core.
Any comments on the bond buying program, as well as on whether further rate increases are likely this year, will be listened out for at Trichet's press conference.
Ahead of Trichet's press conference, the euro was trading 0.8 percent lower at $1.423.
The key piece of economic news this week will likely be Friday's U.S. jobs report for July, especially as investors are particularly worried about the recovery of the world's largest economy. Economists expect that 90,000 jobs were created last month and that the unemployment rate was unchanged at 9.2 percent.
Elsewhere in Asia, Hong Kong's Hang Seng shed 0.5 percent to 21,884.74 while China's Shanghai Composite Index advanced 0.2 percent to 2,684.04.
South Korea's benchmark Kospi dropped 2.3 percent to 2,018.47.
Benchmark oil for September delivery was down $1.02 at $90.91 a barrel in electronic trading on the New York Mercantile Exchange.
Alex Kennedy in Singapore contributed to this story.