European markets fall on global economic concerns

[February 03, 2009]  LONDON (AP) -- European markets fell Tuesday as investors continued to worry about the sputtering global economy despite governments' efforts to boost growth with increased spending.

By noon in mainland Europe, Britain's FTSE 100 was down 0.57 percent at 4,054.54, Germany's DAX dived 0.75 percent to 4,239.16, and France's CAC 40 dipped 0.73 percent to 2,908.55.

"The markets generally are really not sure what direction to take. They are still quite depressed compared to six months ago, but the current economic news is quite discouraging," said Andrew Bell, a markets strategist at Rensburg Sheppards.

"I think we're basically treading water and opinion is very divided whether we may retest the autumn lows because there is not enough good news to take us higher, or is sentiment so bleak that if we do get news that isn't as bad as expected that will push it higher."

Shares in BP PLC fell 4 percent in London after Europe's second-largest oil company said it swung to a steep loss of $3.3 billion during the fourth quarter of 2008 as sliding oil prices hit revenues hard. In mid-July, oil prices were around $147 a barrel. Since then, fears about the global economic outlook have pushed oil prices down to around $40 a barrel.

For the full-year as a whole, BP said net profit was $21.2 billion, up slightly on 2007's $20.8 billion.

Mobile phone service provider Vodafone Group PLC saw its shares rise 6.6 percent after it said revenues rose 14 percent in the fourth quarter to 10.47 billion pounds ($15 billion), compared to the same period a year earlier. The rise was led by a 28-percent gain in its Asia, Pacific and Middle East operations.

In Asia, most Asian markets rose modestly but trimmed their early gains, as optimism over billions of dollars in new stimulus measures in Japan and Australia gave way to concerns about the state of the global economy.

Japan's Nikkei 225 stock average fell 0.6 percent to 7,825.51 after trading about 1 percent higher earlier in the session. Hong Kong's Hang Seng Index declined 0.7 percent to 12,776.89.

Elsewhere, South Korea's Kospi added 1.4 percent to 1,163.20 and Australia's key stock measure rose 0.3 percent. Markets in India, China, Singapore and Taiwan also advanced.

In Tokyo, stocks got a jolt after the Bank of Japan said it would buy 1 trillion yen ($11.2 billion) in corporate shares held by financial institutions to help shore up capital at commercial banks, who've taken a beating from volatile equities markets. But the rally soon fizzled.

Australia announced 42 billion Australian dollars ($26 billion) in fresh spending in hopes of shielding the country's resources-based economy from the global downturn. Hours after the announcement, the country's central bank slashed the benchmark cash rate by a full percentage point, sending money market rates to their lowest in 45 years.

But news of the latest government intervention was overtaken by anxiety among many investors about sinking corporate profits and signs of economic weakness in Asia and beyond.

In the U.S. overnight, new figures showed personal spending and construction spending eroded further last month in the world's largest economy. Uncertainty about the details of America's $819 billion stimulus proposal, still up for debate in the U.S. Senate, also sidelined investors.

"People are looking toward stimulus packages with cautious optimism, but I wouldn't say we're breaking the shackles that are holding us back," said Miles Remington, head of Asian sales trading at BNP Paribas Securities in Hong Kong. "I don't think the global economy has really changed on a fundamental basis."

On Tuesday, the head of the International Monetary Fund said Asia's struggling economies will likely bounce back quickly once their trading partners begin to recover, predicting a turnaround could come by late this year or early 2010.

But for 2009, the outlook is still grim: the IMF's latest forecast for world economic growth is 0.5 percent, with advanced economies contracting by 2 percent.

"Those figures are the lowest rates we have experienced in the postwar period, so they really are rather gloomy," the IMF's managing director, Dominique Strauss-Kahn, said in a Web cast.

In New York, selling in industrial, energy and financial stocks sent the Dow Jones industrial average down 0.80 percent to 7,936.83 on Monday. The Standard & Poor's 500 index slipped 0.1 percent to 825.44, but the tech-heavy Nasdaq composite rose 1.2 percent to 1,494.43.

Wall Street futures pointed to a weaker open for U.S. markets. Dow futures fell 15 to 7,872 and S&P500 futures were off 1.9 to 819.40. Nasdaq 100 futures were up 2 at 1,190.75.

Oil prices gained slightly in European trade. Light, sweet crude for March delivery rose 39 cents to $40.47 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell $1.60 overnight to settle at $40.08.

[Associated Press; By LOUISE WATT]

AP writers Jeremiah Marquez in Hong Kong, Tomoko A. Hosaka in Tokyo and Elaine Kurtenbach in Shanghai contributed to this report.

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