World stocks down as Dow hovers round Nov. lows

[February 18, 2009]  LONDON (AP) -- World stock markets mostly fell again Wednesday after a bad day on Wall Street and as investors fled to the safest assets amid fears the financial crisis is taking another turn for the worse.

Fears have mounted in recent days that the downturn has become more acute, particularly in emerging markets such as Eastern Europe, and that the troubles there will infect the already weakened financial institutions of richer countries.

"The world is buying assets that have the support of credible governments -- investment grade corporate debt, Treasuries, Bunds -- and eschewing assets that either have no support or the support of a frail government, like equities, or Irish-Greek-Polish government debt," said Kit Juckes, head of credit research and market strategy at the Royal Bank of Scotland.

The FTSE 100 index of leading British shares fell 25.44 points, or 0.6 percent, to 4,008.69, while Germany's DAX declined 29.16 points, or 0.7 percent, to 4,187.44. The CAC-40 in France fell 9.66 points, or 0.3 percent, to 2,865.57.

Earlier in Asia, the Japan's Nikkei 225 stock average fell 111.07 points, or 1.5 percent, to 7,534.44, its lowest close in nearly four months. Hong Kong's Hang Seng, down almost 2 percent earlier in the day, recovered to gain 70.60 points, or 0.6 percent, to 13,016.00.

Meanwhile, Wall Street's benchmark indexes were expected to recoup some of their recent heavy losses as they hover within a hair's breadth of the multiyear lows they touched in November 2008 after the near-collapse of the global banking system.

Dow Jones futures were up 26 points, or 0.4 percent, at 7,533 while the broader Standard & Poor's 500 futures rose 2.50 points, or 0.3 percent, to 788.10.

Much of the remainder of the week's direction will rest on whether the Dow or the S&P drop below those 2008 lows.

Pessimism in the U.S. has been further stoked by the news that General Motors Corp. and Chrysler LLC requested nearly $22 billion in government aid in return for painful restructuring to ensure their survival.

The markets are fearing that the likelihood is that further bailouts are in the offing around the world and it won't just be the car manufacturers lining up for special treatment.

"It doesn't matter which country you happen to live in either -- the U.S., France, Germany, Britain, Russia, Japan or China -- ever increasing sections of industry and commerce could well be planning to join queues requesting government cash. What an unholy and unprecedented mess this now is," said Howard Wheeldon, senior strategist at BGC Partners.

There's also skepticism about whether the $787 billion stimulus package signed by President Barack Obama will do anything to revive the world's largest economy any time soon as a rash of downbeat news highlighted the scale of the job in hand. Obama is set to lay out a new $50 billion program Wednesday to prevent home foreclosures, though investors still crave more details about the administration's latest financial bailout plan.

"It is becoming increasingly clear that the system is broken," said Kirby Daley, senior strategist at Newedge Group in Hong Kong. "And there does not seem to be a comprehensive long-term solution being formulated by any country, let alone a coordinated solution to the world's economic problems."

Elsewhere in Asia, South Korea's Kospi was off 1.2 percent at 1,113.19. Markets in Australia, India, New Zealand and the Philippines also fell, though those in Singapore and Taiwan traded up modestly.

The region's biggest decliner was mainland China, where stocks had risen sharply in recent weeks. The Shanghai Composite index plunged 4.7 percent to 2,209.86 amid reports that regulators were investigating the recent surge in bank lending and whether it raised financial risks. Analysts said there was speculation some of the lending was being used to place bets on the stock market.

Oil prices were steady, with light, sweet crude for March delivery down 0.02 cents at $34.91 a barrel on the New York Mercantile Exchange. The contract tumbled $2.58 to settle at $34.93 overnight amid gloomy economic data.

In currencies, the dollar rose 0.1 percent to 92.51 yen, while the euro traded 0.1 percent lower at $1.2578.

[Associated Press; By PAN PYLAS]

AP Business Writer Jeremiah Marquez in Hong Kong contributed to this report.

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