World markets fall amid China, Europe jitters

[June 01, 2010]  BANGKOK (AP) -- World stocks fell Tuesday amid news China's manufacturing slowed in May and as investors fretted Europe's shaky government finances could undermine the global economic recovery.

Wall Street appeared to be in store for further losses as investors returned to a theme that has troubled markets for weeks: whether austerity measures to address Europe's debt mountain will send the region back into recession.

Surveys showing that growth in China's manufacturing had slowed recently underlined that Asian manufacturers and exporters remain vulnerable to any waning of demand from Europe and elsewhere.

Standard & Poor's 500 futures were down 13.40 points, or 1.3 percent, at 1,075.10. Oil prices, meanwhile, hovered below $73 a barrel. The euro resumed its slide against the dollar.

As trading got underway in Europe, Britain's FTSE 100 tumbled 2 percent, Germany's DAX shed 1.6 percent and France's CAC-40 dived 1.9 percent.

Earlier in Asia, Japan's Nikkei 225 stock average fell 56.87 points, or 0.6 percent, to close at 9,711.83 and Australia's S&P/ASX 200 dropped 0.4 percent to 4,413.1.

In Seoul, the Kospi lost 0.7 percent to 1,630.40, Taiwan's benchmark shed 1.2 percent to 7,289.33 and Hong Kong's Hang Seng retreated 1.4 percent to 19,496.95.

The signs of slowing in the manufacturing sector helped drag China shares lower, with the benchmark Shanghai Composite Index falling 0.9 percent to 2,568.28.

Masatoshi Sato, market analyst at Mizuho Investors Securities Co. Ltd. in Tokyo, said investors remained worried about the impact of Europe's debt crisis on the global economy.

"Investors are not convinced that the crisis will end soon. With growing uncertainty over the euro zone's crisis, investors are bracing for a further slump in the euro against the dollar," Sato said.

Political uncertainty was also a negative in Tokyo, where Prime Minister Yukio Hatoyama faced mounting calls for his resignation after a small party left his coalition government in protest at the reversal of a campaign promise to move a U.S. military base off the southern island of Okinawa.

Linus Yip, a strategist at First Shanghai Securities in Hong Kong, said that manufacturing news out of China on Tuesday may have dampened sentiment. Surveys showed that the recovery in China's manufacturing slowed in May due to lackluster demand both at home and abroad.

"It was not too good because it fell below market expectations," Yip said.

Jorg Zeuner, chief economist at Liechtenstein-based VP Bank, said Asian stocks were expensive before the Greek debt crisis struck and that the market slump is correcting that.

"The correction was appropriate but might have gone a little too far now. So there's a some potential in Asia stocks," Zeuner said in Singapore. "The world is growing with Asia at the helm, the U.S. following, and the Euro zone dragging behind."

He said he expects the euro to fall to $1.15 by the end of the year.

In currencies, the dollar fell to 90.67 yen from 91.21 yen late Monday. The euro slid to $1.2161 from $1.2304.

Benchmark crude for July delivery was down 6 cents at $73.90 a barrel in electronic trading on the New York Mercantile Exchange.

[Associated Press; By PAMELA SAMPSON]

Associated Press writers Shino Yuasa in Tokyo, Alex Kennedy in Singapore and AP Business Writer Elaine Kurtenbach in Shanghai contributed to this report.

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