World stocks down amid recession fears

LONDON — World stocks fell sharply Thursday as recession fears gripped markets and briefly sent oil prices below $50 a barrel.

The FTSE 100 index of leading British shares closed down 130.69 points, or 3.3 percent, at 3,874.99, while Germany's DAX was 133.89 points, or 3.1 percent, lower at 4,220.20. The CAC-40 in France was 107.47 points, or 3.5 percent, lower at 2,980.42.

(enlarge photo) Traders work on the floor of the New York Stock Exchange Thursday, Nov. 20, 2008. (AP Photo/Jason DeCrow)

U.S. stocks were in retreat though trading was volatile. The Dow Jones index of leading U.S. shares was down another 81.32 points, or 1.0 percent, at 7,915.96, on top of Wednesday's 427 point decline. Meanwhile, the broader S&P 500 was down 11.78 points, or 1.5 percent, at 794.80, but had been nearly 30 points down earlier at 776.76.

The latest bout of selling in the U.S. was stoked by a Labor Department report showing that new applications for jobless benefits unexpectedly rose to a 16-year high of 542,000 last week from a downwardly revised figure of 515,000 in the previous week. Analysts had been expecting a modest decline to around 505,000.

The gloomy global economic outlook was reflected in oil prices, which fell below $50 a barrel for the first time since January 2007. Light, sweet crude for December delivery was down $2.67 at $50.95 a barrel in early-afternoon London trade.

Stocks have been in retreat for most of the week amid concerns about the global economy after further grim U.S. economic news and as the Big Three Detroit-based automakers pleaded to be bailed out by Congress.

"Extreme risk aversion and market volatility re-emerged this week as Congress debated the need to rescue the U.S. automotive industry from near certain collapse," said Michael Woolfolk, an analyst at Bank of New York Mellon.

Though stock investors have moved to price in recessions around the world in their valuations of companies, they remain wary of returning to the markets to buy up beaten down stocks, lest they fall victim to another bout of selling.

"I think what's happened is there are so many moving parts that nobody is able to understand what all of the implications are," said Joe Clark, managing director of Financial Enhancement Group in Anderson, Ind.

He said the worries about the automakers and the fear among consumers are leaving investors unwilling to step in and buy stocks until there is some clarity over how much the economy might slow.

As well as the uncertainty around individual companies, investors remain worried about broader economic news flow around the world.

So far, Japan, Hong Kong and European countries including Germany and Italy are officially in recession and most expect the U.S. and Britain to be joining them soon, whatever fiscal stimulus policy-makers come up with in the coming days and weeks.

Businesses have been quick to respond to the gloomy outlook by cutting jobs. Most notably, Citigroup said Monday that it is cutting 53,000 jobs around the world.

In Japan, Isuzu Motors Ltd. fell 17 percent after the truck maker said it will cut 1,400 contract workers as it scales back production for this fiscal year. Isuzu is the latest automaker to announce production cuts, joining domestic rivals such as Toyota Motor Corp. and Honda Motor Co.

In Britain, aircraft engine maker Rolls-Royce PLC said it plans to cut up to 2,000 jobs next year as demand for its products slumps amid the global economic downturn.

Earlier, Tokyo's benchmark Nikkei 225 average slid 570.18 points, or 6.9 percent, to 7,703.0 as figures showed exports in October sank 7.7 percent, the biggest decline since 2001, causing the country — an export powerhouse — to report a rare trade deficit.

Elsewhere in Asia, South Korea's main index fell for its eighth straight session, losing 6.7 percent to 948.69, as the country's currency, the won, fell to its lowest level in more than a decade. Hong Kong's Hang Seng benchmark sank 517.24 points, or 4 percent, to 12,298.56.

In Australia, the main stock measure retreated 4.2 percent as weakening commodity prices dragged down the country's natural-resource giants.

Compared to the rest of Asia, mainland China's markets suffered modest losses, after speculation over a possible deal by Disney to build a long-awaited theme park in Shanghai boosted property shares. The benchmark Shanghai Composite Index fell 1.7 percent.

The dollar weakened 0.9 percent to 94.99 yen, while the euro was steady at $1.2518.

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AP Business Writer Jeremiah Marquez in Hong Kong contributed to this report.

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