World stocks fall as oil drops to $64 a barrel

[July 06, 2009]  LONDON (AP) -- World stock markets fell as oil prices slumped Monday amid concerns that any recovery in the global economy will be a long, hard slog following disappointing U.S. jobs data last week.

In Europe, the FTSE 100 index of leading British shares was down 50.70 points, or 1.2 percent, at 4,185.58 while Germany's DAX declined 79.29 points, or 1.7 percent, to 4,628.92. The CAC-40 in France was 47.40 points, or 1.5 percent, lower at 3,072.11.

And earlier in Asia, Japan's Nikkei 225 stock average fell 135.20, or 1.4 percent, to 9,680.87 and Hong Kong's Hang Seng dropped 226.23, or 1.2 percent, to 17,977.17 in a choppy session.

Trading volumes were light in both Europe and Asia as investors awaited a lead from Wall Street, which was closed Friday for the Independence Day holiday. U.S. stocks had been hit last Thursday after the nonfarm payrolls data, which showed U.S. employers slashed 467,000 jobs in June -- 100,000 more than anticipated.

Wall Street futures pointed to a weaker open Monday. Dow futures were down 76, or 0.9 percent, at 8,165 while the broader Standard & Poor's 500 futures fell 8.3, or 0.9percent, to 885.

"Markets sold off hard on the back of those payroll figures last Thursday so the potential remains for something of a reversion to be seen but we are now moving into the slower summer season and so long as the green shoots of recovery continue to struggle to take root, then equities will likely remain adrift," said Matt Buckland, a dealer at CMC Markets.

Equities rose from the middle of March until the start of June on hopes that the U.S. economy in particular will recover from recession sooner than anticipated. Many investors saw stock valuations as particularly cheap and started buying. The S&P 500 index in the U.S. rose around 16 percent during the second quarter, its best performance since 1998, amid hopes of a global recovery despite worries about the banking system, public finances and the length and depth of the recession.

But disappointing economic news over the last few weeks brought an abrupt end to the rally and altered the general mood prevailing among investors.

Mitul Kotecha, an an analyst at Calyon Credit Agricole, said the recent performance in stock markets could just be a response to the big gains recorded since March or merely reflect the traditional summer lull when many investors cash in before returning in September.

However, he said a "more sinister and more likely explanation is that uncertainty is increasing. Until now there has been plenty of less negative news and use of the now worn phrase 'green shoots' but little information to judge the magnitude and speed of recovery going forward."

The start of the second quarter earnings reporting season will provide some clues as to whether companies have seen off the worst of the recession. U.S. aluminum giant Alcoa Inc. opens earnings season on Wednesday.

Elsewhere in Asia, Australia's index lost 1.2 percent and Singapore's market closed off 1.2 percent.

Defying the region's losses, South Korea's Kospi added 0.6 percent after Samsung Electronics Co., the world's biggest manufacturer of memory chips, announced quarterly profit estimates for the first time. The company estimated operating profit would come it at between 2.2 trillion won and 2.6 trillion won, compared with 2.4 trillion won last year.

In mainland China, the benchmark Shanghai Composite Index closed up 1.2 percent at 3,124.67, a 13-month high.

Thailand's stock market is closed Monday and Tuesday.

Oil prices tumbled amid the global economic uncertainty, with benchmark crude for August delivery down $2.50 to $64.23 a barrel.

The dollar fell 0.8 percent to 95.27 yen the euro dropped 0.3 percent $1.3916.

A big loser Monday was the pound, which fell 1 percent to $1.6121.

"The poor tone reflects a growing perception that U.K. economic data and ongoing concerns over the poor fiscal situation do not warrant a continuation in the sterling rally that had been in place since March," said Jane Foley, research director at Forex.com.

Earlier this year, the pound fell to a near 24-year low of just above $1.35 amid mounting worries about the state of the British economy and the level of government borrowing. It has slowly recouped some of those losses since March as the appetite for risk improved, most notably in the stock markets.

[Associated Press; By PAN PYLAS]

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

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