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Stocks muted as China urges caution

World stock markets were muted after the Chinese premier's downbeat comments on the world's number two economy injected caution ahead of two days of testimony to Congress by the Federal Reserve chief.

The weekend comments from Web Jiabao came after China reported that economic growth fell to a three-year low of 7.6% in the second quarter.

Growth was down from the previous quarter's 8.1%, damping hopes that China can make up for US and European weakness, but in line with the government's official target of 7.5% for the year

Mr Wen said China's economy has not yet entered a recovery and "economic difficulties may continue for some time". He vowed more measures to help struggling sectors.

As trading got under way in Europe, France's CAC 40 lost 0.1% to 3,177.81. Germany's DAX gained 0.1% to 6,562.40. Wall Street was set to fall with Dow futures off 0.2% at 12,687. Broader S&P 500 futures were down 0.2 percent at 1,348.40.

Market attention is now turning to quarterly corporate earnings and to US Federal Reserve chairman Ben Bernanke's testimony to Congress on Tuesday and Wednesday.

There have been expectations the Fed might loosen monetary policy even further to help reinvigorate the stalled US recovery. But analysts say Mr Bernanke is unlikely to foreshadow policy changes in his testimony.

In Asia, Hong Kong's Hang Seng inched up 0.2% to 19,121.34 and South Korea's Kopsi rose 0.3% to 1,817.79. Australia's S&P/ASX 200 added 0.6% to 4,105.10. Markets in Indonesia and the Philippines also rose.

China's Shanghai Composite lost 1.7% to 2,147.96. Japan's markets were closed for a public holiday.

In energy trading, benchmark crude for August delivery was down 50 cents at 86.60 dollars a barrel in electronic trading on the New York Mercantile Exchange. The contract rose 1.02 dollars on Friday to finish at 87.10 dollars per barrel in New York. The euro was down 0.2% at 1.2220 and the dollar fell 0.3% to 79.05 yen.

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