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September 23, 2017

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Weak US economy report dents global stock markets

SEOUL/HONG KONG--World stock markets were mostly weaker Friday after a government report showed the U.S. economy shrank in the first quarter and the U.S. dollar lost value against major Asian currencies.

The yen gained against the greenback after reports that Japan's consumer price index rose 3.2 percent in April, the highest inflation rate since 1991. Higher inflation was driven by a sales tax increase that is expected to dampen growth this quarter.

Europe opened mostly lower but the drop was small. Britain's FTSE 100 was down 0.1 percent to 6,867.07 and France's CAC 40 dipped 0.3 percent to 4,519.33. Germany's DAX rose 0.2 percent to 9,962.37.

Futures indicated Wall Street was set for a flat session. Dow futures stayed nearly unchanged and S&P 500 futures edged down 0.1 percent.

Japan's Nikkei 225 declined 0.3 percent to 14,632.38 and South Korea's Kospi slipped 0.9 percent to 1,994.96.

"Asian equities have remained directionless heading into the weekend and the end of the month with mixed performances across the board," IG strategist Stan Shamu said in commentary.

Australia's S&P/ASX 200 fell 0.5 percent to 5,492.50. Markets in Indonesia and New Zealand also fell.

But Hong Kong's Hang Seng added 0.3 percent to 23,081.65. Thai stocks also rose.

Figures from the Commerce Department showed that the U.S. economy, the world's largest, shrank by an annualized rate of 1 percent in the January-March period, far worse than the initial estimate of a 0.1 percent contraction.

Much of the blame has been pinned on the brutal winter weather that engulfed large parts of the U.S. in the early part of the year. As such, analysts said the data provide few insights about the underlying strength of the U.S. economy.

But investors in Asia didn't take heart from figures suggesting U.S. unemployment continues to fall. The Labor Department said the number of Americans applying for unemployment benefits fell by a bigger-than-anticipated 27,000 to 300,000 last week. The fall took the 4-week moving average down to its lowest level since August 2007.

The news comes as Bank of Japan weighs up whether to unveil fresh easing measures to support the economy after the tax rise, with fears that further widening of the monetary base could fan inflation to more than its target of 2.0 percent.

Focus Turns to PMI Data

There was also some cheer in figures showing new claims for unemployment insurance benefits fell sharply last week to 300,000, pulling the trend line to its lowest level in nearly seven years.

Focus is now on the release next week of HSBC's closely watched purchasing managers index (PMI) of manufacturing activity from China, the United States and Europe, hoping for signs of further improvement. China is also due to unveil its own official PMI on Sunday.

With last month's readings for China showing a firm pick-up, there are hopes of another healthy result for May that would ease concerns over the Asian economic giant.

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