European stocks down on profit-taking

[November 26, 2008]  LONDON (AP) -- European stock markets fell Wednesday as investors booked recent profits despite further advances on Wall Street and most Asian markets. Expectations that the European Union will call on its 27-members to boost spending by over $150 billion to support their economies failed to cheer investors.

In Europe, the FTSE 100 index of leading British shares was down 76.92 points, or 1.8 percent, at 4,094.33, while Germany's DAX was 56.40 points, or 1.2 percent, lower at 4,504.02. The CAC-40 in France was down 67.24 points, or 2.1 percent, at 3,142.32.

Analysts said the pullback in Europe was expected as trading activity in the U.S. is likely to be curtailed later in the run-up to Thursday's Thanksgiving holiday despite a raft of U.S. economic data releases.

U.S. stock futures were down, with Dow futures off 53 points, or 0.6 percent, to 8,392, while Standard & Poor's futures were down 6.3 points, or 0.7 percent, to 846.90.

"After the stellar gains we've seen in equity markets since the end of last week, Wednesday's session is set to start with the inevitable pause for breath and with Thanksgiving rapidly approaching the question now is whether the rest of the week will be little more than a gentle decline off the recent highs," said Matt Buckland, a dealer at CMC Markets.

The markets have had a lot to digest this week, not least the weekend bailout of Citigroup Inc. and Tuesday's latest attempt by the U.S. government to shore up its financial system.

The U.S. Treasury and the Federal Reserve said they will inject another $800 billion into the U.S. economy to help unfreeze the market for consumer debt and to make mortgage loans cheaper and more available. The program is aimed at reviving moribund credit markets to get financial institutions to start lending to consumers and households again.

"There's a little bit of bailout fatigue in the markets after a couple of good days and investors are battening down the hatches ahead of Thanksgiving," said Howard Wheeldon, senior strategist at BGC Partners.

This so-called "bailout fatigue" was evident this morning with the markets' reaction to reports that the European Commission wants EU governments to inject around euro130 billion ($166.5 billion) into their economies to boost growth and confidence.

"Only through a significant stimulus package can Europe counter the expected downward trend in demand," said the Commission report, a copy of which was obtained by The Associated Press.

Earlier, investors in Asia snapped up a number of resource companies after Australia's BHP Billiton Ltd., the world's biggest mining company, abandoned its hostile takeover bid rival Rio Tinto Ltd. The $68 billion deal had spurred worries among steel makers that the combined company could unfairly influence prices for iron ore, a key ingredient in steel.

Australia's main index declined 2.3 percent, with BHP adding 3.9 percent and Rio Tinto plunging more than 34 percent.

Throughout the region, there were signs that confidence was returning to the markets as investors took solace in Wall Street's first triple-session advance in more than two months.

Hong Kong's Hang Seng Index climbed 490.85 points, or 3.8 percent, to 13,369.45, and South Korea's Kospi jumped 4.7 percent to 1,029.78. Markets in Singapore, mainland China, Taiwan and the Philippines also gained.

However, Japan's Nikkei 225 stock average dropped 110.71 points, or 1.3 percent, to 8,213.22 after Fitch Ratings cut Toyota's credit rating two notches to "AA" from "AAA."

Fitch blamed the world's auto market slump and a strong yen -- the latest sign that even a premier brand like Toyota isn't immune to the global slowdown. Toyota shares dropped 4.6 percent, and Honda Motor lost 1.9 percent.

Meanwhile, Thai stocks ended little changed despite further turmoil in the country after the main international airport canceled all flights as thousands of protesters swarmed the complex in efforts to bring down the government, stranding tourists and dealing a blow to the country's already-fragile tourism industry.

Oil prices pushed back up with light, sweet crude for January delivery rising 71 cents at $51.48 a barrel. The contract tumbled 7 percent overnight, putting pressure on some major European energy stocks, such as BP PLC and Royal Dutch Shell, both down 3 percent.

In currencies, the dollar was steady at 95.19 yen, while the euro fell 0.6 percent to $1.2980.

[Associated Press; By PAN PYLAS]

AP Business Writers Jeremiah Marquez in Hong Kong and Yuri Kageyama in Tokyo contributed to this report.

Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.