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European Stocks Fall as China Tightens, Traders Eye G20

Europe's stock markets and the euro fell on Friday as investors reacted to fresh monetary tightening in China ahead of an eagerly-awaited Group of 20 finance meeting in Paris.

London's FTSE 100 index of top shares sank 0.48 percent to 6,058.08 points in late morning deals.

Frankfurt's DAX 30 dipped 0.12 percent to 7,396.24 points, the Paris CAC 40 retreated 0.18 percent to 4,144.93 and the Stoxx 50 index of top Eurozone companies was off 0.26 percent to 3,056.55.

China's central bank announced Friday it would raise the amount of money banks must keep in reserve as it struggles to keep inflation under control in the world's second biggest economy.

The reserve requirement ratio will be raised by 50 basis points from February 24, the People's Bank of China (PBoC) said.

"China seems to be becoming increasingly concerned with its property market spiraling out of control as it applies the brake to bank lending yet again," ETX Capital trader Manoj Ladwa said.

The announcement from China, which has a voracious appetite for commodities, hit London's FTSE particularly hard because of its high gearing towards the mining and resources sector, according to Ladwa.

Shares in Anglo American dived 3.02 percent to 3,208.50 pence, despite news that net profits almost tripled to $6.54 billion (4.82 billion euros) last year, boosted by high commodity prices and emerging markets demand.

Earlier this week, the world's top miner BHP Billiton said its half-year net profits soared 72 percent to $10.52 billion while giant Rio Tinto said its annual net profits almost tripled to $14.32 billion.

However in Friday trade, BHP lost 3.30 percent to 2,402 pence and Rio Tinto shed 1.13 percent to 4,395 pence.

Meanwhile, in foreign exchange deals, the euro slid to $1.3554 as finance ministers gathered in Paris to hammer out common criteria for measuring global economic imbalances.

French President Nicolas Sarkozy has vowed to reform the world monetary system and commodities markets during his year at the G20 helm, saying he aims to defend poor economies from currency and trade turbulence.

"The G20 meeting ... is also expected to ratify the agreement earlier this week by (Eurozone ministers) to double the EFSF bailout fund to 500 billion euros, though Germany will no doubt want some onerous strings attached," noted CMC Markets analyst Michael Hewson.

"Overshadowing all of this has been increased tensions across the Middle East," he added.

Financial markets were on edge this week after violent protests from Bahrain to Libya, with tensions also heightened by Iran's reported efforts to send naval ships into the Mediterranean.

Demonstrators in various Arab states have drawn inspiration from pro-democracy protests that led to the recent oustings of leaders in both Tunisia and Egypt.

Source: Agence France Presse


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