European stocks drop after weakness on Wall Street
LONDON -- European stocks fell Wednesday following overnight drops on Wall Street and data showing German business sentiment slid to a 26-year low in March.
By noon in mainland Europe, Britain's FTSE 100 was down 1.4 percent to 3,857.11, Germany's DAX lost 0.9 percent to 4,150.53, and France's CAC 40 slipped 0.6 percent to 2,856.69.
Stocks fell after the Ifo Institute reported that a key gauge of German business sentiment fell in March to its lowest level since November 1982, a clear indication that the recession in Europe's biggest economy continues unabated.
Asian stock indexes were mixed as weakness in U.S. markets and a record plunge in Japanese exports prompted investors to reassess the recent surge in global markets. As in the U.S., where markets pulled back after a huge rally Monday, global investors were re-examining the Obama administration's plan to pair taxpayer and private money to help banks wipe clean up to $1 trillion in bad loans from their books.
Wall Street still headed for a slightly higher open Wednesday, with investors looking ahead to reports on big-ticket manufactured goods and sales of new homes. Dow Jones industrial average futures rose 0.4 percent to 7,650, Standard & Poor's 500 index futures climbed 0.6 percent to 808.20, and Nasdaq 100 index futures added 0.5 percent to 1,242.00.
In Europe, automakers gained on the back of an announcement from Porsche SE that it had secured a €10 billion loan from several banks to help it pay for Volkswagen AG shares and solidify its majority stake in Europe's biggest automaker by sales.
Porsche Automobile Holding shares were up 0.5 percent in Frankfurt, while Volkswagen shares rose 3.4 percent.
But investors were discouraged by the Ifo Institute's report on German business sentiment, which said exporting firms were more pessimistic than in February and more manufacturing firms plan to reduce staff numbers. The Ifo business climate index slipped to 82.1 points in March compared with 82.6 points in February.
"The German business confidence is a real worry. We were looking for the business climate to be around 82.2," said Stephen Pope, chief global markets strategist for Cantor Fitzgerald.
In London, HSBC PLC lost 2.2 percent after it said it may lay off as many as 1,200 staff following a review of operations.
Pope said another concern for investors was the expected clash in outlooks at next month's G20 summit. British Prime Minister Gordon Brown is attempting to drum up support for a U.S.-led spending increase while European Economic and Monetary Affairs Commissioner Joaquin Almunia reminds member states that they have to control their deficits.
"He is saying 'for the sake of the euro you have to bring your spending in line' and that is going to be a thorny issue when the G20 meets, because the British and the Americans will say we have to see spending up, which is diametrically opposed to what is going to come through from the bureaucrats in Europe," Pope said. "I think there's going to be a lot of disagreement behind closed doors."
Highlighting the issue, Czech prime minister and current president of the EU Mirek Topolanek said Wednesday that the U.S. plans to spend its way out of recession are "a way to hell." He said the costs of the stimulus plans and financial bailouts "will undermine the stability of the global financial market."
In Japan, the market's mood was cautious amid fresh evidence the economic slowdown continued to wipe out overseas demand for goods from the world's second-biggest economy. Government figures showed exports plunged by nearly half in February from a year earlier -- a record monthly drop.
In Japan, the Nikkei 225 stock average dipped 8.31 points, or 0.1 percent, to 8,479.99. Hong Kong turned in Asia's worst performance as the Hang Seng sank 288.23 points, or 2.1 percent, to 13,622.11.
Weighing on the territory were losses in mainland China, where Shanghai's index retreated 2 percent to 2,291.55, ending a seven-day rally of nearly 10 percent.
On the upside, South Korea's Kospi rose 0.5 percent to 1,229.02, while Australia's key index rose 0.8 percent. Taiwan's market jumped 2 percent and India's Sensex gained 2.1 percent to 9,667.9.
In stocks, Japan's Sanyo Electric Co. fell 1.4 percent after saying Tuesday that it expects a group net loss of 90 billion yen ($918 million) for the business year ending this month, far worse than its previous projection that it would break even.
On Tuesday, the Dow fell 1.5 percent to 7,659.97 and the Standard & Poor's 500 index tumbled or 2 percent to 806.35.
Oil prices declined in Europe, with benchmark crude for May delivery down $1.16 to $52.82 a barrel.