European, Asian stocks retreat amid economic gloom

[December 01, 2008]  LONDON (AP) -- European and Asian stock markets fell Monday ahead of an expected lower opening on Wall Street amid renewed signs that the world economy is slowing down sharply.

The FTSE 100 index of leading British shares was down 106.42 points, or 2.5 percent, at 4,181.59, while Germany's DAX was 163.83, or 3.5 percent, lower at 4,505.61. The CAC-40 in France was 93.66, or 2.9 percent, lower at 3,169.02.

Earlier, Asia's markets had closed lower with the benchmark Nikkei 225 stock average in Tokyo down 115.05 points, or 1.4 percent, at 8,397.22 after advancing 7.6 percent last week. Investors sold exporters as the yen strengthened, which erodes their overseas earnings.

Markets in South Korea, Australia and Singapore also fell, while India's benchmark Sensex index reversed early gains, falling 2.8 percent to 8,839.87 in the wake of the terrorist attacks in Mumbai that left 172 people dead.

"It's a poor start to December for equity markets, particularly as last week's rally had generated hopes of a turning point but the economic newsflow doesn't get any better; if anything it's getting worse," said Neil Mackinnon, chief economist at ECU Group.

Surveys of activity in the manufacturing sector in the euro zone and Britain were particularly poor Monday. Both pointed to a sharper-than-expected contraction in output and stoked market expectations that the European Central Bank and Bank of England will cut interest rates aggressively later this week.

An equivalent survey into China's manufacturing sector also made for grim reading, generating fears that one of the main engines of global growth over the last few years is slowing down sharply.

A survey later into the U.S. manufacturing sector from the Institute for Supply Management will be of particular interest as it will provide further insights into the strength of the world's largest economy.

U.S. stock futures were lower ahead of the ISM report, suggesting Wall Street would open down Monday after its first five-day advance since July 2007. Dow futures were down 159 points, or 1.8 percent, to 8,662, and Standard & Poor's futures were down 19.7 points, or 2.2 percent, to 875.6.

Also weighing on sentiment were reports showing only modest gains in U.S. retail sales on Black Friday -- the traditional start of the American holiday shopping season following Thursday's Thanksgiving holiday.

According to preliminary figures released Saturday by ShopperTrak RCT, a research firm that tracks total retail sales at more than 50,000 outlets, sales rose 3 percent to $10.6 billion on Friday from the same day a year ago. A more complete sales picture of how the Thanksgiving shopping weekend fared won't be known until Thursday when the nation's retailers report November same-store sales, or sales at stores opened at least a year.

Elsewhere in Asia, stocks in Thailand reversed early gains as investors weighed prospects that the country's political crisis will be resolved soon. Anti-government protesters have occupied Bangkok's two main airports for nearly a week, cutting off air freight, stranding tourists and crippling the economy. The benchmark SET index fell 2.7 percent to 390.92.

Bucking the trend were Hong Kong and mainland China, where key indexes rose on expectations of further measures by the Chinese government to boost the economy after last month's big interest rate cut and announcement of a multibillion dollar stimulus package.

Hong Kong's Hang Seng index closed up 220.60 points, or 1.6 percent, to 14,108.84, continuing its rally from last week, when it rose nearly 10 percent. China's Shanghai Composite index gained 1.3 percent to 1,894.61.

Oil prices fell after OPEC declined to cut production at an informal meeting in Cairo on Saturday. Light, sweet crude for January delivery was down $2.33 to $52.10 a barrel in electronic trading on the New York Mercantile Exchange.

In currencies, the dollar declined 1.5 percent to 93.98 yen while the euro fell 0.3 percent to $1.2660.

[Associated Press; By PAN PYLAS]

Associated Press Business Writer Kelly Olsen in Seoul contributed to this report.

Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.