World stocks down as US, Europe prick growth hopes

By ALEX KENNEDY Associted Press Writer

SINGAPORE (AP) - World stock markets mostly fell Friday as Europe's fiscal austerity measures and stubbornly high unemployment in the U.S. undermined faith in the global economic recovery.

Investors initially cheered Monday's announcement of a $1 trillion debt bailout package from the European Union and International Monetary Fund as it halted a speculative run against Greek bonds that had threatened to engulf other countries.

But now, traders are mulling how deep spending cuts in Spain, Portugal and Greece may slow Europe's economy.

"It was taken as good news at first, but investors are starting to focus on the impact the austerity measures will have on the macroeconomic picture in Europe," said Lee Kok Joo, head of research at Phillip Securities in Singapore.

As trading opened in Europe, Britain's FTSE 100 slid 1.2 percent, Germany's DAX dropped 0.7 percent and the CAC-40 in France was down 2 percent. Dow futures pointed to stocks falling modestly at the U.S. open.

Earlier in Asia, Japan's benchmark Nikkei 225 stock average lost 158.04 points, or 1.5 percent, to 10,462.51.

Among Japanese blue chips, Sony Corp. plunged 6.7 percent after its operating profit forecast fell short of expectations.

Investors also dumped banking shares in Tokyo after the New York attorney general launched a probe into eight banks to determine whether they misled rating agencies about mortgage securities.

Hong Kong's Hang Seng index fell 1.4 percent to 20,145.43, China's benchmark index in Shanghai slipped 0.5 percent to 2,696.63 while Australia's S&P/ASX 200 index dropped 0.9 percent.

Shares in Malaysia, India, and Thailand also fell while Indonesia gained and South Korea was little changed.

A disappointing jobs report triggered selling on Wall Street on Thursday, with the Dow Jones industrial average falling 113.96 points, or 1.1 percent, to 10,782.95.

A U.S. Labor Department report Thursday showed U.S. claims for jobless benefits were not falling fast enough to signal steady job growth. High unemployment remains a primary obstacle to a U.S. economic recovery.

In currencies, the dollar fell to 92.62 yen in Tokyo from 92.66 yen in New York late Thursday. The euro fell to $1.2506 from $1.2519.

Benchmark crude for June delivery was down 86 cents to $73.55 a barrel in electronic trading on the New York Mercantile Exchange. The contract dropped $1.25 to settle at $74.40 on Wednesday.