European stocks down ahead of expected US sell-off

[December 19, 2008]  LONDON (AP) -- European stock markets fell Friday after a mixed performance in Asia, as lower oil prices hit heavyweight energy stocks, particularly in Britain, and expectations of another drop on Wall Street weighed on investor sentiment.

The FTSE 100 index of leading British shares was down 56.54 points, or 1.3 percent, at 4,274.12, with oil companies BP PLC and Royal Dutch Shell down around 3 percent as oil prices slid further despite the decision by oil cartel OPEC earlier in the week to slash 2.2 million barrels from its daily production quotas from January.

Germany's DAX was 67.99 points, or 1.4 percent lower, at 4,688.41. The CAC-40 in France fell 58.76 points, or 1.8 percent, to 3,175.39.

Futures suggested Wall Street would extend Thursday's losses, when the Dow Jones industrial average fell 2.5 percent and the Standard & Poor's 500 index dropped 2.1 percent.

The Dow was expected to open 88 points, or 1.0 percent, lower at 8,590 while the S&P was projected to drop a further 9.60 points, or 1.1 percent, to 882.90.

Analysts said it could be a rocky ride on Wall Street later as investors have to negotiate today's triple witching -- when stock index futures, stock index options and stock options all expire on the same day. It occurs every three months on the third Friday of March, June, September and December.

"If liquidity was bad before, it now borders on the non-existent, and with no data of note to digest, another rocky ride in low volumes looks to be pre-programmed," said Marc Ostwald, strategist at Monument Securities.

All eyes will be on any developments with regard to the U.S. automakers, who are hoping for crucial bailout funds from the Bush administration -- in one of its last important moves.

Bush administration officials were reviewing several approaches to assisting the automakers, including short-term loans from the Treasury Department's $700 billion Wall Street rescue program. But Treasury Secretary Henry Paulson told a business forum in New York on Thursday night that while bankruptcy for the automakers should be averted if possible, an "orderly" reorganization might be the best solution.

Earlier, Asian stocks closed mixed after the Bank of Japan cut its main interest rate to 0.1 percent and announced that it will temporarily purchase commercial paper and increase its purchases of Japanese government bonds.

The Bank of Japan had been under pressure to cut interest rates after the U.S. Federal Reserve sliced its own benchmark rate this week to a range of zero to 0.25 percent -- the lowest level on record. Analysts said the Fed's action left Japan, its exporters reeling and economy already in recession, with little choice but to follow suit.

An initial surge in Japanese stocks on the rate cut soon petered out, and Tokyo's 225 stock average dropped 78.71 points, or 0.9 percent, to 8,588.52. The dollar, higher in the morning, weakened against the yen after the Japan central bank's announcement and was down 0.7 percent at 88.76 yen.

"A strong yen continued to weigh down on the market, dragging down exporters," said Yutaka Miura, a senior strategist at Shinko Securities Co. Ltd. in Tokyo.

Hong Kong's Hang Seng Index lost 2.4 percent to 15,127.51 even as Beijing said Friday it would help the territory keep its economy stable amid the global financial crisis.

Markets in mainland China, South Korea and Australia traded higher but none posted gains of more than 1 percent.

Light, sweet crude for February delivery was up 78 cents to $42.45 a barrel in electronic trading on the New York Mercantile Exchange by midafternoon in Singapore. The contract overnight fell $2.94 to settle at $41.67.

[Associated Press; By PAN PYLAS]

AP Business Writer Jeremiah Marquez contributed to this report.

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