World markets fall on concerns about US recovery

By CARLO PIOVANO Associated Press Writer

LONDON (AP) - World markets mostly fell Friday as downbeat U.S. indicators showed the recovery in the world's largest economy is weaker than expected.

The latest official estimates show the U.S. economy expanded by 2.7 percent in the first quarter, less than the government's expectation of 3 percent.

Together with muted forecasts from major retailers such as Nike and poor employment and housing figures earlier this week, the data shows the U.S. economic recovery is losing steam.

Britain's FTSE 100 stock index was up 0.4 percent at 5,081.53 while Germany's DAX was 0.6 percent lower at 6,079.53. France's CAC-40 was down 0.6 percent at 3,532.51.

After Asian stocks closed lower, Wall Street lacked momentum on the open. The Dow industrials average was 0.1 percent lower at 10,147.66 while the Standard & Poor's 500 was 0.1 percent higher at 1,074.20.

Besides the weak U.S. economic indicators, investors are also worrying that world leaders, who meet in Canada this weekend, disagree over how to guide the world economy back to strength.

"The cohesion generally evident among policymakers in dealing with the global crisis is in danger of giving way to a more divisive debate about how to manage the recovery," said Daragh Maher, currency analyst at Credit Agricole.

Whereas Europe is firmly focused on tackling deficits with spending cuts, the U.S. has warned that tough austerity could prematurely derail the global recovery.

Other ideas also divide world leaders, such as the notion of a bank levy, which several countries - notably those whose banks have not been devastated by the 2008 banking crisis, such as Australia and China - are reluctant to embrace

"Any hopes for a grand vision of how to protect the global recovery are unlikely to emerge," said Maher.

Meanwhile, U.S. lawmakers reached agreement on Friday on an overhaul of the rules that govern banks and investment firms. The bill would regulate banks' ability to trade in derivatives, but the rules are less strict than investors had feared. That helped some U.S. financial stocks rise.

In Asia, Japan's benchmark Nikkei 225 stock index fell 190.86 points, or 1.9 percent, to 9,737.48. Hong Kong's Hang Seng index slipped 0.2 percent to 20,690.79 and South Korea's Kospi shed 0.6 percent to 1,729.84.

Benchmarks in Australia, Malaysia, Taiwan, mainland China and India were also in the red.

Japanese exporters retreated amid concerns about the yen's ongoing strength against the dollar while in Australia, commodity and financial names were among the day's big losers as investors took a cautious stance amid uncertainty about what policies new Prime Minister Julia Gillard could implement.

"I think in general stocks will trade sideways until we get a bit more clarity with company earnings in a couple weeks," said Tey Tze Ming, a trader with Saxo Capital Markets in Singapore. "I think the global economic recovery is still intact so I'm pretty optimistic on stocks."

The Dow Jones industrial average Thursday fell 1.4 percent to 10,152.80, while the broader Standard & Poor's 500 index fell percent to 1,073.69, completing its first four-day drop since early May.

In currencies, the dollar fell to 89.37 yen from 89.54 in New York late Thursday. The euro fell to $1.2307 from $1.2326.

Benchmark crude for August delivery was up $1 at $77.51 a barrel in electronic trading on the New York Mercantile Exchange. The contract added 16 cents to settle at $76.51 a barrel on Thursday.

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Associated Press Writer Alex Kennedy in Singapore contributed to this report.