World shares turn lower as Chi

By PAMELA SAMPSON AP Business Writer

BANGKOK (AP) - Most world markets retreated Wednesday as an interest rate hike by China sank property shares and dampened investor enthusiasm in Asia. But a robust showing by Australia's largest bank helped propel the Sydney benchmark higher.

Oil prices rose above $87 a barrel after a report showed U.S. crude supplies unexpectedly fell last week, suggesting demand may be improving. In currencies, the dollar rose against the yen but dropped against the euro.

European shares were mixed in early trading. Britain's FTSE 100 dropped 0.2 percent to 6,078.84. Germany's DAX was 0.2 percent higher to 7,337.02 and France's CAC-40 was up marginally to 4,110.88. Wall Street was headed lower, with Dow futures down narrowly down to 12,189 and S&P 500 futures down 0.2 percent to 1,319.20.

Sentiment in Asia was dampened after China's central bank hiked interest rates late Tuesday for the second time in little over a month to tamp down stubborn inflation in food and property prices. Investors worry that could slow economic growth elsewhere given China's increasingly important role in the global economy.

Japan's Nikkei 225 stock average dropped 0.2 percent to close at 10,617.83, although Japanese automakers advanced after a U.S. government report ruled out electronic flaws in runaway Toyota vehicles.

Toyota Motor Corp. jumped 5.2 percent and Nissan Motor Co., which reported a 78 percent jump in quarterly profit after the market closed, gained 2.5 percent.

South Korea's Kospi shed 1.2 percent to 2,045.58 ahead of an interest rate decision later this week by the Bank of Korea. Benchmarks in Taiwan, Singapore and India also fell.

Australia's S&P/ASX added 0.3 percent to 4,904.80, bolstered by gains in bank shares after Commonwealth Bank, the country's largest lender, reported a 5 percent rise in half-year profit. Its shares rose 2.1 percent. Rivals Westpac Banking Corp. and National Australia Bank both rose, 1.9 percent and 2 percent respectively.

Hong Kong's Hang Seng fizzled 1.4 percent to 23,164.03 after property developers fell sharply on concerns over Beijing's monetary tightening. Sino Land Co. tumbled 4 percent, Hang Lung Properties Ltd. was down 3.5 percent, and China Resources Land Ltd. slid 3.9 percent.

The benchmark Shanghai Composite dropped 0.9 percent to 2,774.07 and the Shenzhen Composite Index for China's smaller, second market was off 1 percent to 1,186.22. Property developer China Vanke lost 0.5 percent and Poly Real Estate Group Co. sank 3 percent.

Analysts said soaring real estate prices are being targeted seriously by China's communist government with measures to rein in the lavish lending by state-run banks that is driving investment - a large chunk of which is believed to be in speculative property deals.

"The central government is trying to show that it will decide property prices, not local governments," said Francis Lun, general manager of Fulbright Securities Ltd. in Hong Kong.

Food inflation is also a worry among China's leaders.

"The inflation rate is very likely to hit close to 6 percent because main food-producing countries like Australia and Brazil have been hit by natural disasters, so food production is likely to fall below estimates," Lun said.

In New York on Tuesday, the Dow Jones industrial average finished higher for the seventh consecutive day. Investors took in stride a move by China's central bank to control inflation by raising short-term interest rates.

The Dow rose 71.52 points, or 0.6 percent, to close at 12,233.15.

The broader Standard & Poor's 500 index rose 5.52, or 0.4 percent, to 1,324.57. The Nasdaq composite index rose 13.06, or 0.5 percent, to 2,797.05.

In currencies, the dollar rose to 82.58 yen from 82.38 yen late Tuesday. The euro rose to $1.3640 from $1.3627.

Benchmark crude for March delivery was up 57 cents at $87.51 a barrel in electronic trading on the New York Mercantile Exchange. The contract lost 54 cents to settle at $86.94 on Tuesday.