World stocks slide after Dow posts 6-year low

[February 20, 2009]  LONDON (AP) -- World stock markets fell sharply Friday as the selling pressure on Wall Street was expected to continue at the open later amid pessimism about the ability of governments to prevent the deepest global economic downturn in generations.

Investors in Asia and Europe found few reasons to wade into the market after the Dow Jones industrial average breached the levels it touched in November, when global equities went into a tailspin as the financial crisis gathered steam.

The Dow's miserable finish -- its close Thursday of 7,465.95 was its worst since Oct. 9, 2002, when the last bear market hit rock bottom -- deepened concerns that the markets' downturn is far from over and could be set for a new phase. It also provided a clear sign that investors don't see a quick end to the worst global slowdown in decades despite the unprecedented intervention in economies and markets by governments around the world.

"Investors are quite simply running out of short-term confidence with equities -- especially among the banks -- and as they batten down the hatches we're seeing these big technical levels being tested with arguably little regard for the fundamentals." said Matt Buckland, a dealer at CMC Markets.

In Europe, the FTSE 100 index of leading British shares fell 101.12 points, or 2.5 percent, to 3,917.25, while Germany's DAX slumped 132.33, or 3.1 percent, to 4,082.88. The CAC-40 in France dropped 91.55 points, or 3.2 percent to 2,781.05.

In Asia earlier, Japan's Nikkei 225 stock average lost 141.27 points, or 1.9 percent, to 7,416.38, and the broader Topix index hurtled to its worst finish in 25 years. Hong Kong's Hang Seng dropped 324.59, or 2.5 percent, to 12,699.17.

The selling pressure was set to resume in the U.S. at the open, with Dow futures 98 points, or 1.3 percent, lower at 7,364, and the broader Standard & Poor's 500 futures down 10.9 points, or 1.4 percent, at 768.50.

"Investors seem to have retreated to the sidelines as they wait and see how the latest government actions will address the ongoing problems in the banking and housing sectors," said Mansoor Mohi-uddin, an analyst at UBS.

The recovery in stocks since last November's lows was fueled by hopes that big stimulus and bank bailout packages from governments around the world, along with aggressive interest rate cuts from the central banks, would help limit the depth and length of the downturn.

However, the economic news remains unremittingly grim, with few, if any, signs coming through that the actions around the world are bearing any fruit. If anything, the dataflow is showing that the recession is in fact getting worse in many of the world's major economies.

Earlier, the monthly purchasing managers index -- a key gauge of business activity -- into the euro zone's services and manufacturing sectors indicated that the recession gathered pace in the first few weeks of February, piling the pressure on the European Central Bank to cut interest rates again in March.

And Sweden-based automaker Saab filed for bankruptcy protection and said it had applied to spin off from its parent company General Motors, itself already in dire financial shape and hoping for billions more in U.S. government aid as the car industry shrivels.

Meanwhile, Compagnie de Saint-Gobain, one of the world's largest producers of glass for the construction and automobile industries, said it would sell around euro1.5 billion ($1.9 billion) in new shares to bolster its capital amid the deepening global economic crisis. Its shares plunged 16 percent on the news.

In Asia, the news was equally grim, with Thailand reporting a 26.5 percent slide in exports in January -- their steepest fall in 12 years. It was just the latest evidence that Asia's export-driven economies are getting hammered as demand for their cars, cameras and other goods vanishes in the West.

Elsewhere in Asia, South Korea's Kospi shed 3.7 percent to 1,065.80. Stock measures in India, Taiwan and Singapore sank about 2 percent, while those in Australia and Thailand were down over 1 percent.

In mainland China, Shanghai's benchmark gained 1.5 percent after the government said it would aid light industry and petrochemical suppliers in its latest stimulus measures.

Meanwhile, the dollar was 0.3 percent lower at 94.01 yen, while the euro was 0.4 percent lower at $1.2619.

In oil, light, sweet crude sank $1.33 to $38.15 per barrel in electronic trading on the New York Mercantile Exchange, reversing strong gains overnight. The contract jumped 7 percent Thursday after a report showed crude stocks were far less than expected. The vast majority of trades have shifted to the April contract with the March contract expiring Friday.

[Associated Press; By PAN PYLAS]

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

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