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Soft Start Expected For China Stock Market

The China stock market has alternated between positive and negative finishes through the last four trading days since the end of the two-day slide in which it had fallen more than 25 points or 1 percent. The Shanghai Composite finished just below the 2,390-point plateau, and now analysts are predicting continued consolidation at the opening of trade on Tuesday.

The global forecast for the Asian markets remains bleak, thanks largely to concerns from Europe. Of concern, the Spanish economy slipped back into recession in the first quarter of 2012, fueling concerns that the country may fail to meet the deficit targets. On the political front, investors worried that the turmoil in the Netherlands may cause the country to lose its AAA rating. The European and U.S. markets finished firmly in the red, and the Asian bourses are tipped to follow suit.

The SCI finished modestly lower on Monday as losses from the cement companies were offset by support from the brokerages.

For the day, the index retreated 18.27 points or 0.76 percent to finish at 2388.59 after trading between 2,383.07 and 2,411.51. The Shenzhen Composite Index plunged 16.90 points or 1.8 percent to end at 944.87.

Among the actives, Citic Securities shed 2.2 percent and Everbright Securities fell 3.1 percent, while Sichuan Shuangma Cement jumped 3.3 percent and Huaxin Cement climbed 2.9 percent.

The lead from Wall Street suggests further consolidation as stocks saw considerable weakness on Monday, although they ended the session well off their worst levels of the day. Troubling news from overseas weighed on the markets in early trading, but selling pressure waned as they day progressed.

Bank of Spain said that gross domestic product shrank 0.4 percent on quarter. This followed a 0.3 percent fall in the fourth quarter, which was the first decline in activity since the final three months of 2009.

Traders also reacted negatively to news that French President Nicolas Sarkozy came in second in a first round of voting, losing to socialist Francois Hollande. Sarkozy is expected to face an uphill battle in a run-off election against Hollande on May 6, raising concerns about a setback to efforts to diffuse the European debt crisis.

Among individual stocks, shares of Kellogg (K) came under pressure after the cereal market lowered its full-year 2012 financial guidance based on a weaker-than-expected first quarter performance. Kellogg fell by 6.1 percent to a two-month closing low.

Retail giant Wal-Mart (WMT) also posted a notable loss on the day, sliding by 4.7 percent after the New York Times reported on bribery allegations at the company's Mexico unit. Wal-Mart confirmed that it is probing possible violations of the U.S. Foreign Corrupt Practices Act.

Pfizer (PFE) posted a more modest loss after the drug giant announced that it has entered into an agreement to sell its infant nutrition business to Nestlé for $11.85 billion in cash.

The major averages climbed well off their lows for the session but still closed firmly in negative territory. The Dow closed down 102.09 points or 0.8 percent to finish at 12,927.17, while the NASDAQ fell 30.00 points or 1 percent to 2,970.45 and the S&P 500 dropped 11.59 points or 0.8 percent to 1,366.94.

In economic news, China's manufacturing activity shrank for a sixth consecutive month in April, but the pace of decline eased from a month earlier owing to slower contraction in output, new orders and employment, a key survey revealed Monday.

The HSBC/Markit purchasing managers' index rose to 49.1 in April from 48.3 in March. However, the reading below 50 still indicated a contraction in activity.

The manufacturing output index also remained below the neutral mark at 49.1, up from 47.3 in March. The rate of decline in overall new orders and new export orders eased in April, according to the report. Employment also contracted at slower pace compared to March.

by RTT Staff Writer

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