World markets dip ahead of crucial G20 meeting

[March 12, 2009]  LONDON (AP) -- World stock markets mostly fell Thursday as the sharp rally started earlier in the week ran out of steam amid grim economic and corporate news and unease ahead of this weekend's G20 meeting of finance ministers and central bankers.

Wall Street posted its first two-day rally for a month on Wednesday amid relief that ailing U.S. banking giant Citigroup Inc. said it was performing better than at any time since the autumn of 2007. But there was little to entice investors to carry on buying in Asia and Europe ahead of the G20 meeting, which could see the world's leading industrial nations divided over how to best get the global economy back on track.

The FTSE 100 index of leading British shares was down 62.04 points, or 1.7 percent, at 3,631.77, while Germany's DAX fell 83.73 points, or 2.1 percent, to 3,830.37. The CAC-40 in France was 51.81 points, or 1.9 percent, lower at 2,622.39.

Earlier in Asia, Japan's Nikkei 225 stock average fell 177.87 points, or 2.4 percent, to 7,198.25 but Hong Kong's Hang Seng recovered early losses to gain 0.6 percent to 12,001.53.

With U.S. retail sales data set to show a decline in February and weekly jobless claims figures expected to show another 600,000 increase there was little for investors to get excited about.

Wall Street was poised to open lower, with Dow futures down 66 points, or 1 percent, at 6,848 and the broader Standard & Poor's 500 futures 7.10 points, or 1 percent, lower at 713.40.

Attention in the markets was increasingly turning on what policymakers around the world will do to try and stabilize the global economy. Eyes will be on this weekend's meeting of the G20 finance ministers and central bankers in southern England, in light of Wednesday's call from U.S. Treasury Secretary Tim Geithner for bigger fiscal stimulus actions around the world and more money to be given to the International Monetary Fund.

"The G20 meeting remains a key focus with the markets looking for substantive policies rather than platitudes from policymakers," said Neil Mackinnon, chief economist at ECU Group.

Geithner's comments came as hopes of a unified plan emerging at the G20 leaders' meeting were fading fast, due to an apparent split between the U.S. and the 16-nation euro zone over the best way forward.

Even though Geithner agreed that the international financial regulatory regime should be a topic of discussion this weekend, his emphasis clearly was on the need for governments around the world to spend their way out of recession.

That call will likely fall on deaf ears in Europe, where many governments are arguing that there is no further need at the present time for additional tax cuts or spending boosts.

"There seems little hope, then, that the participants will make progress and the chance is greater that international frictions will break out into the open," said Stephen Lewis, an analyst at Monument Securities in London.

"This would add to the sense of despair in financial markets," he warned.

Despite the hopes that Citigroup may have turned the corner, the mood in the markets remained volatile as the economic and corporate news from all corners of the world continued to disappoint.

With China reporting a slump in retail sales growth in February and many companies across Europe, such as Italian luxury goods maker Bulgari SpA and German fertilizer supplier K+S AG, reporting hard times ahead, investors looked to book profits accumulated earlier in the week.

Official government figures also confirmed that Japan, the world's second largest economy, saw output contract at its sharpest rate in 35 years in the fourth quarter of 2008.

Earlier in Asia, South Korea's Kospi inched marginally higher but markets in Singapore, Australia, mainland China, Taiwan and elsewhere traded lower.

Oil prices recovered somewhat from a steep fall overnight, with benchmark crude for April delivery up 52 cents at $42.85 a barrel in Asian trade. On Wednesday, the contract tumbled $3.38, or more than 7 percent, to settle at $42.33.

In currencies, the dollar dropped 1.1 percent to 96.10 yen while the euro fell 0.5 percent to $1.2780.

[Associated Press; By PAN PYLAS]

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

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