Traders said recent sustained gains left stocks vulnerable, with concerns over inflation emerging to provide a ready excuse to sell as investors consolidate positions.

London’s FTSE 100 index of top shares fell 0.10 percent to 6,056.83 points in late morning trade, Frankfurt’s DAX 30 rose 0.27 percent to 7,390.75 points and the Paris CAC 40 slipped 0.22 percent to 4,002.14.

The Stoxx 50 index of leading eurozone companies dropped 0.29 percent to 3,015.65 points approaching the half-way mark.

“Although Asia found support (from Egypt), Europe appears to be stumbling … and traders are once again left weighing up the fact that equities have already come a long way and now the questions revolve around the management of creeping inflationary pressures,” said IG Index trader Yusuf Heusen.

Egypt’s new military rulers dismantled ousted strongman Hosni Mubarak’s regime on Sunday, dissolving parliament, suspending the constitution and promising a referendum on political reform.

Traders also reacted to news that eurozone industrial output fell for the first time in three months in December, when harsh winter weather hit production in Germany and elsewhere.

Industrial production fell 0.1 percent from November but was 8.0 percent stronger than in December 2009, the European Union’s Eurostat agency said Monday.

The December figures were slightly weaker than the market consensus estimate of flat output on the month and an 8.1 percent increase on the year in a Dow Jones Newswires survey of economists.

Earlier Monday, Asian markets closed higher thanks partly to the easing of Egypt’s political crisis, although there was caution about upcoming Chinese inflation data while oil prices remained high, analysts said.

Tokyo’s Nikkei climbed 1.13 percent to 10,725.54 points despite data showing Japan’s economy contracted 1.1 percent in the last quarter of 2010.

The data confirmed Japan had lost its 42-year-old spot as the world’s number two economy to China.

The market partly responded to a modest gain on Wall Street last Friday, when optimism about US economic prospects was compounded by relief at the resignation of Mubarak after weeks of unrest.

The Dow Jones Industrial Average rose 0.36 percent to finish at 12,273.26 points ahead of the weekend.

“At present, it doesn’t appear as if we’ll get much additional support from New York at the open with the Dow now pointing around five points lower, but after the big run-up we’ve seen since the end of January a phase of consolidation is arguably overdue,” said trader Heusen.

Exports in January stood at 7.7 billion Egyptian pounds ($1.32 billion), down from 8.2 billion pounds, she said, without saying whether the comparison was with December or January 2010.

She was speaking at a news conference given by the prime minister, the main economic ministers and the central bank governor to give an assessment of their sectors’ performance and priorities — and show the government was operating as normal.

She said authorities were providing extra food supplies to stabilize prices in the market and avoid shortages.

Many shops have been closed during 12 days of protests against President Hosni Mubarak and banks have been shut, making it hard for Egyptians to stock up on basic goods. Witnesses have said that some prices have been pushed up.

“The policy to stabilize prices depends on supply and demand. And in order to reduce prices, supply needs to be increased,” she said.

Ibrahim, one of the ministers brought in by a cabinet reshuffle during the countrywide protests to oust Mubarak, added that the ministry’s plan to combat price rises was to increase the supply of commodities.

Finance Minister Samir Radwan said earlier that his ministry had allocated an extra 2.8 billion Egyptian pounds ($480 million) over the past two days to finance wheat purchases for Egypt, the world’s biggest wheat importer.

Mubarak, who has also appointed a vice president for the first time and said he will not run for the presidency again, met some of the new ministers on Saturday — a rebuff to the protesters who have demanded the 82-year-old leader step down.

Prime Minister Ahmed Shafiq said the fact that demonstrators were now calling for a “Week of Steadfastness” showed that the “Day of Departure” protests on Friday had failed.

Hundreds of thousands of people demonstrated in Cairo’s Tahrir Square and in cities across Egypt to demand Mubarak quit.

“Those who are in Tahrir, their position today is different from their final position and even the great day yesterday which was called the ‘Day of Departure’ was quite clear that it was very much weaker than they were (expecting),” he said.

“… they called it afterwards the ‘Week of Steadfastness’, so they gave it different names after the ‘Day of Departure’ and they failed. So I think all that tends toward more stability.”

Shafiq earlier met the new interior minister to ask for the swift return of full police operations across the country, the state news agency MENA said.

Share prices partly lost ground due to last week’s sharp falls on Wall Street — the result both of instability in Egypt and poor corporate results.

However, resource stocks gained on higher prices for oil and gold.

Tokyo’s Nikkei index ended down 1.18 percent, or 122.42 points, at 10,237.92 and Sydney’s S&P/ASX 200 index dropped 0.44 percent, or 21.0 points, to 4,753.9, while Hong Kong’s Hang Seng fell 0.72 percent, or 169.68 points, to 23,447.34.

But the Shanghai Composite Index rose 1.38 percent, or 37.94 points, to 2,790.69, with gains among oil companies and gold miners.

World oil prices rose, with the most obvious threat from Egypt’s turmoil being the risk that supplies through the vital Suez Canal could be disrupted.

New York’s main contract, light sweet crude for March delivery, was up 74 cents at $90.09 per barrel in late afternoon trade. Brent North Sea crude for March fell 44 cents to $98.98.

The gap between Brent and New York has reached unprecedented levels in recent days owing to the high level of crude stockpiles at the Cushing storage depot in Oklahoma.

The price rises were likely to fuel expectations that oil could top $100 a barrel, threatening the global economic recovery.

Sharon Zollner, senior economist at ANZ Bank in Wellington, told Dow Jones Newswires that besides the risk of Suez disruption, “The greater fear is that the turmoil could spread to other Middle East countries, including even Saudi Arabia. If that happens, then all bets on oil prices are off.”

Indian stocks fell 0.37 percent on Monday, its fourth straight day of losses, with the benchmark 30-share Sensex index tumbling 68.21 points to 18,327.76.

Foreign funds have pulled out $924 million from India’s capital markets in this month alone, after investing a record $29 billion in 2010.

Oil refinery stocks were hardest hit.

State-run Bharat Petroleum Corp (BPCL) fell 2.94 percent or 15.75 rupees to 615.8, while rival Hindustan Petroleum Corp (HPCL) closed down 1.6 percent or 5.85 rupees to 359.5.

Tokyo saw heavy losses among companies directly exposed to Egypt, where President Hosni Mubarak is under intense pressure from continued mass unrest, amid calls by Western governments for a peaceful transition.

Among Japanese stocks losing ground were Nissan Motor, which suspended production at its plant near Cairo at least for this week, and Toshiba, which is preparing to build a TV manufacturing plant in Egypt.

In other mixed news for Japan, data showed industrial production posted its strongest rise in 11 months in December, while airline ANA swung back to the black with a group net profit of $457 million in the nine months to December.

On the down side, Honda Motor said its net profit for the three months ended December had fallen nearly 40 percent from a year earlier, but it expected full-year net profit to be 97.5 percent higher.

Asian markets were not helped by Wall Street’s poor performance — the blue-chip Dow Jones Industrial Average lost 0.41 percent over last week after eight straight weeks of gains. Sentiment was dented by disappointing earnings reports from Amazon, Microsoft and Ford Motor Co.

However some traders were unworried about any knock-on from the situation in Egypt.

Hong Kong pared back some of its losses late in the day.

In Shanghai, Simon Wang, an analyst from Guoyuan Securities, was mostly optimistic, saying worries about a likely Chinese rate hike had diminished ahead of holidays at the end of the week.

“The market will likely rise slightly ahead of the Lunar New Year holiday as it seems that the chance for another hike in interest rate is slim for now,” Wang told Dow Jones Newswires.

Risk averse investors kept away from the euro in Asia.

The European single currency stayed at $1.3610 in Tokyo afternoon trade after slumping to a low of $1.3569 in early trade, compared with $1.3609 in New York late Friday, when it plunged due to escalating tension in Egypt.

The single European currency dropped to 111.58 yen from 111.72 yen.

The dollar fetched 82.05 yen, flat from 82.09 yen in New York Friday.

Gold closed at $1,333.30-$1,334.30 an ounce in Hong Kong, up from Friday’s close of $1,314.50-$1,315.50, amid a general rise in commodity prices on the back of the Egyptian unrest.

In other markets:

– Seoul fell 1.81 percent, or 38.14 points, to 2,069.73, led by construction stocks concerns over Egypt.

– Wellington fell 0.42 percent, or 13.90 points, to 3,338.74.

Fletcher Building fell 2.0 percent to NZ$7.73 after Australia’s Crane Group accepted its raised takeover offer of almost Aus$800 million ($792 million). Telecom shed 1.7 percent to NZ$2.28 and Air New Zealand declined 0.7 percent to NZ$1.40.

– Bangkok fell 1.81 percent or 17.73 points to close at 964.10. Banpu lost 24.00 baht to 730.00, while PTT fell 7.00 baht to 335.00.

– Manila fell 2.24 percent, or 88.87 points, to 3,881.47 amid heightened risk aversion due to Egypt.

Philippine Long Distance Telephone Co. fell 0.7 percent to 2,460 pesos; Aboitiz Power dropped 5.3 percent to 27.75 pesos and Metropolitan Bank and Trust Co., fell 2.6 percent to 64.90 pesos.

– Singapore’s Straits Times Index closed down 49.97 points, or 1.55 percent, to 3,179.72.

Property developer CapitaLand slipped 1.1 percent to Sg$3.60 and Singapore Telecom fell 1.9 percent to Sg$3.10.

– Kuala Lumpur closed down 1.95 points, or 0.13 percent, to 1,519.94 as blue-chips led declines ahead of a public holiday Tuesday.

Among fallers, food giant Nestle lost 2.0 percent to 44.70 ringgit, conglomerate Genting eased 1.7 percent to 10.66 ringgit, and energy concern Tenaga lost 1.3 percent to 6.15 ringgit.

– Jakarta lost 78.44 points or 2.25 percent to 3,409.16.

– Taipei was closed for a public holiday.

* The possible spread of unrest to other Arab nations could drive up oil prices and dampen growth global prospects.

* Protests to end the 30-year rule of President Hosni Mubarak continued over the weekend, heightening risk aversion for European investors already concerned by the effect their own region’s sovereign debt crisis and inflation could have on growth.

* Signs of instability in the region sent stocks to their biggest one-day loss in nearly six months and prevented the Dow from notching its longest weekly winning streak since 1995 on Friday.

* Earnings season continues as Exxon Mobil Corp is set to release fourth-quarter earnings, with profits expected to rise more than 30 percent. [nN30169616]

* Other companies due to report earnings include Anadarko Petroleum Corp., Gannett, Illinois Tool Works Inc and Eastman Chemical Company.

* Economic data on tap for Monday includes personal income and spending for December and the Institute for Supply Management-New York release of the January index of regional business activity at 8:30 a.m., while the Chicago PMI for January is due out at 9:45 a.m..

* S&P 500 futures rose 1.3 points and were even with fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures rose 3 points, and Nasdaq 100 futures rose 5 points.

* Alpha Natural Resources said on Saturday it agreed to a $7.1 billion deal to buy Massey Energy Co, which was rocked by a deadly coal mining accident last year. [nN29144292]

* CNOOC Ltd will pay $1.3 billion in its second shale deal with America’s Chesapeake Energy Corp, the latest move by China’s top offshore oil producer in its aggressive drive for overseas acquisitions.

* European shares fell in early trade on Monday on concern that unrest in Egypt could spread.

* In Asia, Japan’s Nikkei share average finished 1.2 percent lower and at one point hit its lowest since early December over Middle East concerns.

Boeing rose 3.4 percent after reporting that it expects to deliver its long-awaited 787 jet in the third quarter. Caterpillar gained 2.8 percent. The two companies contributed more than half of the Dow’s 50 point rise.

Indexes swung between gains and losses earlier in the day. Apple Inc. weighed on the Nasdaq composite index after the company announced that its CEO, Steve Jobs, was taking another medical leave. Apple fell 2.2 percent to $340.65.

After the market closed, Apple said its net income soared 78 percent in the holiday quarter. The company sold 16 million iPhones, an 86 percent increase from the year before, and about a million more iPads than analysts expected.

Banks dropped after Citigroup Inc. reported earnings that fell short of analysts’ forecasts. Citigroup fell 6.4 percent. Bank of America lost 1.6 percent.

Delta dropped 8.2 percent after winter storms caused its earnings to come in lower than investors had expected.

The Dow rose 50.55 points, or 0.4 percent, to close at 11,837.93. The Dow has already gained 2.2 percent this year as optimism builds about the economy. The index rose 11 percent last year, or 14 percent including dividends.

The Standard & Poor’s 500 index edged up 1.78, or 0.1 percent, to close at 1,295.02. The Nasdaq rose 10.55, or 0.4 percent, to 2,765.85.

European markets rose after Greece raised $865 million in another successful bond auction. That allayed concerns about Europe’s financial system, which have been a drag on U.S. markets.

Bond prices fell, pushing their yields higher. The yield on the 10-year Treasury note rose to 3.37 percent from 3.32 percent late Friday. U.S. markets were closed Monday for the Martin Luther King Jr. holiday.

Rising stocks outpaced falling ones by a small margin on the New York Stock Exchange. Consolidated volume was 5.2 billion shares.

A pair of bond auctions in Europe went smoothly, helping to further ease concerns over the region’s sovereign debt issues that have weighed on investors.

Initial jobless claims are expected to decline to 405,000 in the latest week from 409,000. The number is the first read on the labor market since Friday’s surprisingly weak payrolls report.

The November international trade deficit is seen widening to $40.5 billion from $38.71 billion in October. Both the jobless claims and trade data will be released at 8:30 a.m.

“A little flatness in the futures is to be expected this morning, coming off of yesterday’s move,” said Christian Wagner, chief executive at Longview Capital Management in Wilmington, Delaware. “Since we’ve had such a strong run lately, the fear is that we have less room to continue higher from here,” Wagner said.

Intel Corp (INTC.O) results are due after the market close, with Wall Street analysts expecting an 8 percent rise in revenue for the final quarter of 2010 over the year-ago period.

S&P 500 futures rose 1 point and were above fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures were down 13 points, and Nasdaq 100 futures rose 2 points.

Equities have advanced since the start of December in part on hopes that earnings would be strong, though in recent sessions renewed fears over a European sovereign debt crisis partially obscured some strong early results, including from Alcoa Inc (AA.N).

Spain followed Portugal with a successful debt sale on Thursday, and investors showed growing confidence that governments would agree to new measures to stem the debt crisis. A separate sale of Italian bonds also attracted strong demand.

JPMorgan started coverage on the telecommunications services sector with a favorable view, pointing to “strong cash flow, stable business trends and potential improvements as the economy rebounds.” The firm rated AT&T Inc (T.N) at “overweight” and Verizon Communications Inc (VZ.N) at “neutral.”

Williams-Sonoma Inc (WSM.N) raised its fourth-quarter outlook after a strong holiday season as margins improved. The shares rose 1 percent in premarket trade.

The benchmark Dhaka Stock Exchange general index (DGEN) gained 1,005 points, or 15.47 percent, to 7,507 but analysts said the market could still face trouble as the bounce was led by government intervention.

The huge gain came after the market slumped 7.76 percent on Sunday while Monday’s trade was suspended within a hour when the index dived a record 9.25 percent.

“This is a government-led rebound driven by market-boosting measures from the Securities and Exchanges Commission (SEC) and the central bank that have increased liquidity,” Mahmud Osman, professor of finance at Dhaka University, told AFP.

“It is not good for the market and the question is how much of these gains will be retained,” he said.

Many analysts say the heavy losses were caused in part by the central Bangladesh Bank raising the cash reserve requirement (CRR) last month by 50 basis points in a bid to tighten money supply and rein in inflation.

The bank, which is directly controlled by the government, softened its stance late Monday and urged state-owned and private lenders to buy shares to offset the crisis, Bangladesh Bank spokesman M. Asaduzzaman said.

It also relaxed rules on dealers taking out special loans to invest in the stock market.

At the same time the SEC moved to boost loan facilities for retail and institutional investors.

Many new small-time investors blamed the falls Sunday and Monday on the government and regulators.

Mohammad Masum Bepery, whose shares lost 1.2 million taka (150,000 dollars) of their value over the two days, said market swings and intervention by authorities had destroyed confidence.

“The authorities are behind this rally. They have artificially boosted share prices to save their skins,” he said.

The losses led to massive street protests by investors and police used tear-gas and baton-charges Monday to disperse people chanting slogans against the government and regulators outside the stock exchange, where they set alight tyres and office furniture.

On Tuesday officers with water cannon were stationed outside the exchange to prevent a repeat of the unrest.

The DGEN rose 80 percent in 2010 and has suffered a series of falls in the past three weeks, sparking protests from investors and occasional clashes with riot police.

“I have lost half my investment. In two days, I lost 1.5 million taka out of the three million I invested,” one investor, Alam, who uses only one name, told AFP.

“It is completely insane. I am going to wait and see what happens before I decide to sell my shares.”

The DSE is one of the region’s smallest bourses — capitalisation hit 50 billion dollars in early December, compared with the Bombay Stock Exchange’s 1.3 trillion dollars — and is prone to manipulation, experts say.

London’s FTSE 100 index closed 113.93 points or 1.93 percent higher at 6,013.87 points.

“The FTSE 100 started the year with a bang,” said Joshua Raymond, an analyst at City Index trading group.

“Whilst inevitably some may be drawn to the positive start as a signal of intent by investors for 2011, the FTSE is playing catch up to US and European markets which closed higher yesterday, and investors are buying back into the oversold falls suffered on Christmas Eve.

“Make no mistake however, it’s another strong start to the year for the UK markets,” he added.

Investors in London shrugged off an rise in Britain’s standard rate of sales tax, or VAT, to 20 percent — one of several government moves aimed at slashing a record public deficit.

Finance minister George Osborne insisted that the increase from a rate of 17.5 percent starting on Tuesday was a “reasonable” step towards economic recovery and would raise 13 billion pounds (20.2 billion dollars, 15.1 billion euros) per year.

BP was the FTSE’s biggest gainer, soaring 5.88 percent to 492.90 pence as it recovered some of the ground the share lost last year in the wake of the Deepwater Horizon oil spill.

British Airways was also strong, jumping 4.92 percent to 285.90 pence, while other strong sectors included banking, with Barclays up 4.24 percent at 272.75 pence and RBS up 4.12 percent at 40.68 pence.

Compass Group led the few FTSE 100n fallers, dropping 2.24 percent to 568 pence.

Outside the benchmark index, easyJet surged 4 percent to 457.60 pence after the budget airline said it ordered 15 Airbus A320 planes at a “substantial” discount to list price.

The investment has exposed the thin line between private and public markets and underscored companies’ reluctance to enter the stock market, drawing the attention of regulators.

“Companies are doing everything they can do to avoid going public. Facebook is a prime example,” said James Angel of the McDonough School of Business at Georgetown University.

“We’ve made it much more difficult in the United States to be a public company. We’ve made it much more expensive, the legal risks and the trading environment have also changed.”

US media earlier this week said that in addition to Goldman’s investment, Russian investment firm Digital Sky Technologies sank another 50 million dollars into the social networking site.

Goldman evaluated Facebook at a whopping 50 billion dollars, more than longstanding giants such as Boeing, Time Warner and Yahoo!.

The deal allowed Facebook to tap capital markets, while avoiding some of the constraints of trading publicly.

“The big incentive to be a public company is that it is easier to have a trading market for your shares, but if there is a shadow market that provides as much liquidity as the public trading market than companies will not be interested in going public,” said Adam Pritchard of the University of Michigan Law School.

But the investment — which was reportedly part of a move by Facebook to raise three times that sum outside the regulated market — has raised questions about the fairness and safety of such deals.

“Some people might (ask) ‘why should only Goldman’s favored friends get the chance to invest in Facebook?’” said Angel.

There are also concerns the investment could create a shadow exchange market beyond the scrutiny of regulators, exposing investors to potential risks due to the lack of transparency rules.

“Facebook may not necessarily want to disclose a certain amount of what they are doing. Part of the price of being public is the need to disclose finances and aspects of business and they might not want to disclose all their trade secrets,” Angel said.

News of the deal has sparked a swift response from the US market regulator, the Securities and Exchange Commission, which has begun examining disclosure rules for private firms, according to media reports.

“One potential consequence of the SEC investigation would be the SEC filing an enforcement action compelling Facebook to register as a public company,” said Pritchard.

“If that were a possible consequence, Facebook would rather do an IPO than be forced to go public.”

The fast-growing Facebook website has more than 500 million active users per month worldwide as subscribers “friend” their contacts and share their activities.

http://news.yahoo.com/s/afp/20110106/ts_alt_afp/usinternetregulatecompanyinvestfacebook_20110106151021

The business weekly noted that AIG stock rose 40 percent in December to $58 per share. The boost came after AIG reached a deal with the government to repay some $100 billion of federal financial support.

Under the deal, AIG shareholders will be issued warrants, or long-term call options, and that prospect has contributed to the company’s stock surge.

Although AIG looks fully priced, the stock could rise until the warrants are issued in early 2011, it said. As the stock rises, the warrants gain in value, making the stock worth more and pressuring short sellers to cover. The warrants now represent more than $10 of value per share.

It was skeptical of AIG stock in 2010 but changed its view when the government repayment plan was announced in September.

It said Chief Executive Robert Benmosche has said AIG could earn $6 billion to $8 billion in 2011, equating to about $4 per share.

“This suggests the stock ought to trade around $40,”. Book value is around $50 per share, but a discount to book may be warranted.

The stock could come under pressure in the future as the government unloads the $70 billion of stock it owns.