World stocks down on Europe, China growth doubts

[July 01, 2010]  BANGKOK (AP) -- World stock markets were in retreat Thursday amid new concerns about Europe's economic outlook after a warning Spain's debt rating may be downgraded and evidence that China's manufacturing growth is slowing.

Oil prices fell below $75 a barrel in Asia as wilting stock markets dragged down the confidence of crude investors. The yen was virtually unchanged against the dollar, while the euro gained some ground.

U.S. markets were set to slide further. Dow Jones futures were down 16 points, or 0.2 percent, at 9,700 and S&P 500 futures were off 2.8, or 0.3 percent, at 1,023.80. Similarly, in Europe, markets were down. Britain's FTSE 100 index of leading shares was lower by 1.3 percent to 4,855.66, Germany's DAX dropped by 1.1 percent to 5,900.28, and France's CAC-40 was down 1.8 percent to 3,379.10.

A key central bank report released Thursday showed business confidence among Japan's biggest manufacturers improved for a fifth straight quarter, but the Tokyo market was taking its cues from Wall Street, which closed out a painful second quarter Wednesday, leaving investors with heavy losses.

Japan's benchmark Nikkei 225 stock index closed down 191.04 points, or 2 percent, to 9,191.60 -- a seven-month low and extending losses from Wednesday's fall of nearly 2 percent.

"Sentiment in Asia takes its clues from movement on Wall Street and in the eurozone," said Ben Kwong Man Bun, chief operating officer at KGI Asia Ltd. in Hong Kong. "The Nikkei is following the trend in the U.S."

On Wall Street, stocks had their worst quarterly performance since the financial crisis. The Standard & Poor's 500 index, considered by many professional investors to be the best measure of the market's health, lost 11.9 percent for the quarter. The Dow Jones industrial average lost 10 percent. Both indexes are at their lows for 2010.

Other major forces rattling the markets: worries about Europe's ability to cope with debt problems and surveys out of China showing a weakening in its manufacturing in June for a third month.

Moody's Investors Service placed Spain's sovereign debt rating "on review for possible downgrade" Wednesday because of weak economic prospects. Spain -- one of Europe's most indebted countries -- has only just crawled out of nearly two years of recession after a boom, fueled by construction and free-flowing credit, imploded.

The nation's public coffers have been drained by spending to cope with a jobless rate that now stands at 20 percent. Spain is under intense international pressure to slash a ballooning deficit.

South Korea's Kospi index shed 0.7 percent to 1,686.24, and Australia's S&P/ASX 200 tumbled 1.5 percent at 4,237.50.

The Shanghai Composite Index lost 1 percent to 2,373.79. Markets in Singapore, Malaysia and Taiwan also fell. Hong Kong's Hang Seng Index was closed for a public holiday.

In currencies, the dollar was little changed from 88.36 yen in New York late Wednesday. The euro rose to $1.2287 from $1.2233.

Benchmark crude for August delivery was $1.08 to $74.57 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell 31 cents to settle at $75.63 on Wednesday.

[Associated Press; By PAMELA SAMPSON]

Copyright 2010 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.