Asian stocks down after early gains

Asian stock markets struggled to find their footing today, giving back early gains despite a dramatically higher finish on Wall Street last night.

Global markets have fluctuated wildly this week as signs that the US might be heading for recession rattled investors already unnerved by Europe’s worsening debt crisis.

Oil prices fell below $85 a barrel as investors tried to make sense of a week of wild variations in the equity and commodities markets. The dollar weakened against the yen and rose against the euro.

Hong Kong’s Hang Seng rose 1.1% to 19,812.02. Australia’s S&P/ASX 200 gained 1.1% to 4,186.40, while benchmarks in New Zealand, the Philippines and mainland China also rose.

But Japan’s Nikkei 225 stock average was lower by midday local time today - down 0.3% to 8,954.87, after spending the morning in positive territory. A stronger yen, which reduces the value of profits earned overseas, pummelled export shares.

Video game giant Nintendo sank 5%. Toyota lost 1.7%, and consumer electronics maker Panasonic fell 1.1%.

Also reversing course at midday was South Korea’s Kospi, down by 0.2% to 1,814.60. Benchmarks in Taiwan and Malaysia were also down.

“It’s a very volatile market and everyone is reacting to every bit of news. The guy who is trying to pick the bottom is still very much at risk here,” said Tom Kaan of Louis Capital Markets in Hong Kong.

“Into the next one, two or three months, we are not going to see much of a rally,” Mr Kaan said. “People will want to take what’s on the table and sit on the sidelines.”

Yesterday, the Dow Jones industrial average shot higher following news that the US job market may have improved. The Labour Department reported that the number of people applying for unemployment benefits fell below 400,000 last week for the first time since April.

That was enough to catapult Wall Street to one of its biggest points gains of all time. The Dow finished at 11,143.31, up 423.37 points, or about 4%. It had already fallen 634 points on Monday, risen 429 on Tuesday and fallen 519 on Wednesday. Never before has the Dow had four 400-point swings in a row.

The S&P 500 finished up 4.6% and the Nasdaq composite index climbed 4.7%.

“Buyers moved into the market to snap up beaten-down blue chips and a stronger-than-expected unemployment claims figure eased some concern about the slowing economy,” said Ben Potter, strategist at IG Markets in Melbourne.

Markets were also soothed after France, Italy, Spain and Belgium jointly banned short-selling on select stocks. The practice, while legitimate, has been blamed for contributing to market volatility.