Europe stocks down on signs of global slump

Wednesday November 12, 6:29 am ET
By Carlo Piovano, AP Business Writer

European stock markets decline fragile as signs of global economic slump mount LONDON (AP) -- European stocks were mostly lower Wednesday, with investors still hurting from Tuesday's heavy losses, and as earnings reports and economic data showed the global gloom is thickening.

Britain's benchmark FTSE 100 was 0.2 percent lower at 4238.34 points, while Germany's DAX was down 0.1 percent at 4755.42. In France, the CAC 40 was flat at 3338.73.

Although the indexes were higher on the open, they soon fell back into the red, looking for direction after sharp losses Tuesday, when the FTSE 100 closed 3.6 percent lower and the DAX a massive 5.3 percent lower.

"Whilst perhaps not in the 'crisis' situation of a few weeks ago, nervousness continues to undermine risk appetite," said Stuart Bennett, a senior foreign exchange strategist at Calyon in London.

Stocks also fell in Asia, where Japan's benchmark closed down 1.3 percent at 8695.51 and Hong Kong's Hang Seng closed 0.7 percent lower at 13,939.09.

Investors remain wary of stocks as the financial crisis takes its toll on the wider economy. This was clear from both economic data as well as earnings reports.

In Britain, unemployment shot higher, with the number of individuals claiming jobless benefits rising 36,500 in October alone to reaching almost 1 million. The euro zone's industrial production fell 1.6 percent on the month in September, with weakness across all sectors and countries.

In Germany, the government's independent panel of economic advisers Wednesday forecast Europe's largest economy will slow to a standstill next year.

Earnings reports were not much better, with Unicredit SpA -- Italy's largest bank -- reporting net profit dropped 54 percent in the third quarter due to write-downs on financial assets.

In Russia, the currency and stock markets continued to drop plummet after the central bank said it would back off defending the ruble and hiked interest rates by a full percentage point. This caused the ruble-denominated MICEX, where most of Russia's trading takes place, to lose 12.6 percent on Tuesday, prompting regulators to shut the exchange down until Thursday.

The other index, the RTS, lost 10.7 Tuesday and was down 6 percent in morning trade Wednesday.

News overnight in the U.S. also failed to provide much reason to buy stocks.

Starbucks Corp. reported lower sales across the coffee chain, homebuilder Toll Brothers Inc. posted a sharp drop in revenue and said it was to difficult to forecast next year's results. Aluminum producer Alcoa Inc. announced production cuts due to lower prices.

On Tuesday in New York, the Dow Jones industrial average shed 176.58, or 2 percent, to 8,693.96 after falling by more than 300. Tuesday's close was the Dow's lowest since its 5 1/2-year closing low on Oct. 27 of 8,175.77.

Corporate Asia only added to the gloom as leading Japanese energy explorer Inpex cut its forecasts amid slumping oil prices and a stronger yen. There were also signs that Chinese shoppers were holding back after figures showed a softening in the country's retail sales in October compared with a year earlier.

There was also caution ahead of this weekend's summit of leaders from 20 major economies in Washington, where they will discuss how to tackle the global financial crisis.

"People are wondering if their expectations for the G20 are met or exceeded," said Fumiyuki Nakanishi, chief equity strategist at SMBC Friend Securities in Tokyo. "But there is so much uncertainty at this point."

Bucking the regional decline in Asia, the benchmark Shanghai Composite Index added 0.8 percent to 1,859.11 as the country's $586 billion stimulus plan continued to lift sentiment.

In Japan, a grim outlook for the U.S. economy continued to drag on exporters such as automakers and consumer electronics firms. Nissan Motor Co. fell 5 percent, and Canon Inc. was off 3.5 percent.

A drop in commodities and crude oil prices added to anxieties about slowing global growth. Oil prices were hovering near 20-month lows, with light, sweet crude for December delivery down $1.13 to $58.24 a barrel in electronic trading on the New York Mercantile Exchange by late afternoon in Singapore.

In currencies, the dollar fell slightly to 97.24 yen from 97.85 yen in earlier European trading. The euro stood at $1.2529, down from $1.2630.