World stocks fall as European problems simmer

[April 23, 2012]  BANGKOK (AP) -- World stocks skidded lower Monday after budget talks in the Netherlands collapsed over the weekend and a Socialist who wants to put France's austerity plans in reverse won the first round of the country's presidential election.

European stocks and U.S. futures fell as investors recoiled from risky assets amid a tepid report on Chinese manufacturing and signs of political resistance to proposed spending cuts aimed at extricating Europe from its debt crisis.

Britain's FTSE 100 shed 1.4 percent to 5,690.86 and Germany's DAX dived 2 percent to 6,612.49. France's CAC-40 lost 1.2 percent to 3,150.42.

Wall Street appeared headed for a lower opening, with Dow Jones industrial futures down 0.8 percent to 12,890 and S&P 500 futures 0.8 percent lower at 1,364.20.

Asian stocks also posted palpable losses, especially Chinese shares. Hong Kong's Hang Seng fell 1.8 percent to 20,624.39.

Mainland Chinese shares dropped, with the Growth Enterprise Market -- a sub-market focused on smaller, innovative companies -- falling more than 5 percent due to news it will launch a delisting system in May.

The benchmark Shanghai Composite Index lost 0.8 percent to 2,388.59 and the Shenzhen Composite Index lost 1.8 percent to 944.87.

Japan's Nikkei 225 index swung between gains and losses before closing, down 0.2 percent at 9,542.17.

South Korea's Kospi slipped 0.1 percent to 1,972.63 and Australia's S&P/ASX 200 dropped 0.3 percent to 4,352.40. Benchmarks in Singapore, Indonesia, Thailand and Taiwan were also lower.

Over the weekend, Dutch lawmakers failed to resolve differences over budget cuts needed to bring the Dutch deficit back within the European Union limit of 3 percent of gross domestic product.

The government is expected to resign within the coming days and call elections later this year, making it the latest European government forced out of office by the continent's financial crisis.

Markets were also rattled by first-round results in France's presidential election. Socialist candidate Francois Hollande garnered more votes than incumbent conservative President Nicolas Sarkozy.

Hollande wants to renegotiate a European treaty intended to limit excessive government spending in order to emphasize growth over austerity.

If Hollande wins a second-round election May 6, economists fear those steps would upset France's delicate cooperation with Germany that has been key to Europe's efforts to resolve its financial crisis.

Meanwhile, a report on Chinese manufacturing suggested that a slowdown in growth may have bottomed out in the first quarter. HSBC's China purchasing managers index -- a seasonally adjusted index designed to measure the performance of the manufacturing economy -- rose to 49.1 in April, up from 48.3 in March.

Still, any reading below 50 indicates a drop in production. The semisoft result kept traders hopes high for monetary easing by China to prop up growth. One possible option would be for the Chinese central bank to lower the ratio of reserves that banks are required to hold, a move that could boost lending.

"There is no reason to aggressively ease policy, but at the same time, it seems momentum is weaker and some fine-tuning would be useful," said Dariusz Kowalczyk, senior economist at Credit Agricole CIB in Hong Kong.

"I think we have to wait for whether China eases policy in the near term. That will be the key determinant of market sentiment, so let's hope they do."

U.S. stocks rose Friday on the back of stronger profits from Microsoft, McDonald's and other major U.S. corporations. Later Monday, ConocoPhillips, toy maker Hasbro Inc. and Netflix Inc. will report quarterly financial results.

In energy trading, benchmark oil for June delivery was down 68 cents to $103.20 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose $1.16 to settle at $103.88 in New York on Friday.

The euro fell to $1.3154 from $1.3215 late Friday in New York. The dollar fell to 81.08 yen from 81.58 yen.

[Associated Press; By PAMELA SAMPSON]

AP researcher Fu Ting contributed from Shanghai.

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