World stocks fall as national debt, weak Japan growth add to fears of rocky economic recovery

HONG KONG (AP) — World stock markets extended their losses Wednesday as Japan’s much weaker-than-expected economic growth and rising debt loads around the world added to concerns the global recovery was faltering.

Asian markets fell 1 percent or more and European shares were lower as global stocks headed for a second day of losses. The dollar, up strongly the last couple days, slumped against major currencies like the yen and the euro, while oil prices rose.

Investors in Asia were rattled after Japan reported its economy, the world’s second biggest, grew far less than originally expected in the third quarter, at an annualized 1.3 percent instead of 4.8 percent, as cautious companies slashed spending.

The big cut to the growth figure came after a torrent of negative news about governments and companies that reinforced fears the world economy’s turnaround wasn’t sustainable.

Greece’s credit rating was lowered because of growing debt. Ratings agencies also cut ratings on state-linked companies in Dubai, the massively indebted Mideast city-state, and raised concerns about heavy public debt loads in the U.S. and Britain. Disappointing reports from 3M Co. and McDonald’s Corp. also weighed on investors.

The declines, analysts say, reflect growing anxiety that unprecedented stimulus measures behind this year’s market rally have only masked fundamental weakness and could end up worsening economic prospects by running up national debts. That’s led traders to pile into traditional safe-haven investments like bonds and the dollar in recent days.

“It’s becoming increasingly difficult for investors to ignore the symptoms of the continuing underlying sickness, which is unsustainable debt burdens around the world,” said Kirby Daley, senior strategist at Newedge Group in Hong Kong.

“The signs of recovery that we have seen have all been artificially induced and will not be evident into the first half of next year without new stimulus measures.”

After falling sharply Tuesday, European markets added to their losses, with benchmarks in Germany, France and Britain down between 0.1 percent and 0.4 percent.

Earlier in Asia, Japan’s Nikkei 225 stock average fell 135.75 points, or 1.3 percent, to 10,004.72.

Hong Kong’s key index shed 318.76, or 1.4 percent, to 21,741.76, and Shanghai’s benchmark was off 1.7 percent at 3,239.57.

Australia’s market lost 0.7 percent, India’s stock measure declined 0.5 percent and Singapore’s market was off 0.3 percent.

The South Korean market defied the downdraft and gained 0.4 percent to 1,634.17, helped after the International Monetary Fund raised the country’s economic growth forecast for 2010. Taiwan’s market also rose 0.4 percent.

U.S. markets were hit by a mix of debt concerns and disappointing corporate reports.

The Dow ended down 104.14, or 1 percent, at 10,285.97 after being down as much as 140 points.

The broader S&P 500 index fell 11.31, or 1 percent, to 1,091.94, while the Nasdaq composite index fell 16.62, or 0.8 percent, to 2,172.99.

U.S. futures pointed to slightly higher open Wednesday. S&P futures rose 1.6, or 0.2 percent, at 1,091.60.

Oil prices rose in Asia as an unexpected drop in U.S. crude supplies suggested demand may be recovering.

Benchmark crude for January delivery was up 73 cents to $73.35 in electronic trading on the New York Mercantile Exchange. The contract dropped $1.31 overnight.

Gold prices continued their fall, losing 4.5 percent to $1,139 an ounce.

The dollar fell to 87.63 yen from 88.38 yen. The euro rose to $1.4755 from $1.4703.

source: yahoo finance

Tags: global economy recovery, japan, us crude

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