World stock markets were mixed Thursday as markets digested a move by the European Union to create a common banking authority and enthusiasm faded over the U.S. Federal Reserve's new bond-buying program. A weakening yen propelled Japan's benchmark higher.
Stocks in Europe fell in early trading despite European Union finance ministers meeting in Brussels reached an agreement to set up a shared banking supervisor. Under the agreement, the European Central Bank would act as supervisor for banks in the 17 EU countries that use the euro and any other country in the union that wants to opt in.
Britain's FTSE 100 fell 0.2 percent to 5,936.12. Germany's DAX fell 0.5 percent 7,579.94. France's CAC-40 lost 0.1 percent to 3,641.54.
Meanwhile, the Fed said Wednesday following a two-day policy meeting that it will keep spending $85 billion a month on bond purchases to drive down long-term borrowing costs and stimulate economic growth. The Fed will spend $45 billion a month on long-term Treasury purchases to replace "Operation Twist," a previous bond-purchase program of an equal size. And it will keep buying $40 billion a month in mortgage bonds.
Those purchases, and the Fed's revamped commitment to keep interest rates low until unemployment falls to a more normal level, are intended to spur borrowing and spending in an economy still growing only modestly since the financial crisis of 2008.
Futures augured a weak session on Wall Street. Dow Jones futures shed a marginal 2 points to 13,228. S&P 500 futures lost 0.1 percent at 1,426.30.
But Tokyo's Nikkei 225 index jumped 1.7 percent to close at 9,742.73 — an eight-month high — as the yen sank against the dollar, a boost for Japan's export-reliant economy. Mazda Motor Corp. jumped 4.4 percent. Sony Corp. surged 6.4 percent. Panasonic Corp. soared 7.9 percent.
Hong Kong's Hang Seng shed earlier gains to close 0.3 percent lower at 22,445.50. South Korea's Kospi rallied 1.4 percent to 2,002.77. Australia's S&P/ASX 200 fell slightly to 4,582.80.
Besides a spur in borrowing, the Fed's drive to cut rates also induces investors to shift money out of low-yielding bonds and into stocks, analysts said.
"The long-term yields will remain low, so this is definitely a good thing for the U.S. economy, and it's also a positive sign for the Hong Kong stock market. We can clearly see capital inflows to Hong Kong in the past month," said Dickie Wong, executive director of research at Kingston Securities Ltd. in Hong Kong.
"Investors are looking for other places to put money," Wong said. "If you put your money into a savings account, there's no interest at all. For investors in Hong Kong, there is a hunger for yield."
Though welcome by investors, the Fed's announcement did not completely douse concerns over budget negotiations in Washington, which appear to have hit a roadblock.
Without a budget agreement between President Barack Obama and Republican lawmakers, a combination of steep automatic tax hikes and government spending cuts will go into effect in 2013, threatening to throw the U.S. economy into recession.
Even if an agreement can be reached, the halting pace of negotiations is jeopardizing chances that it could be written into proper legislative form and passed through both House and Senate before the new Congress convenes on Jan. 3.
Benchmark crude for January delivery was down 38 cents to $86.39 per barrel in electronic trading on the New York Mercantile Exchange. The contract rose 98 cents to close at $86.77 per barrel on the Nymex on Wednesday.
In currencies, the euro rose to $1.3071 from $1.3063 late Wednesday in New York. The dollar rose to 83.45 yen from 83.20 yen.
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