World stocks down as U.S. consumer confidence slides

LONDON -- World stock markets fell Friday after a survey showed U.S. consumer confidence falling to its lowest level since March and amid ongoing worries that the U.S. second-quarter earnings reporting season will disappoint.

In Europe, the FTSE 100 index of leading British shares closed down 31.49 points, or 0.8 percent, at 4,127.17 while Germany's DAX fell 53.76 points, or 1.2 percent, to 4,576.31. The CAC-40 in France was 42.84 points, or 1.4 percent, lower at 2,983.10. Earlier in Asia, markets gyrated throughout the day before edging down. Japan's Nikkei index notched up its eighth straight loss, closing 3.78 points lower to 9,287.28.

And on Wall Street, the Dow Jones industrial average was down 78.82 points, or 1 percent, at 8,104.35 around midday New York time while the broader Standard & Poor's 500 index fell 8.07 points, or 0.9 percent, to 874.61.

The losses came amid further signs that the U.S. economy is not improving as quickly as many investors were predicting just a month ago -- the July Reuters-University of Michigan consumer confidence index slid to 64.6 from June's 70.8.

"Unemployment is understandably seen as the main catalyst for the drop in U.S. consumer sentiment and the latest jobless statistics from a week ago still seem to be weighing on global stock markets," said David Jones, chief market strategist at IG Index.

"With this sort of news flow suggesting that recovery looks likely to take longer than first thought, it is difficult to come up with an urgent reason for buying shares, so the risk is for another grind lower when trading resumes on Monday," he added.

Key over the coming days and even weeks could be the second-quarter earnings reporting season in the U.S. as it will provide clues about whether companies have already seen the worst of the recession or whether they are still struggling in the first synchronized global economic downturn since the Second World War.

So far, the earnings statements that have been released have been less than upbeat. While aluminum company Alcoa Inc. reported a smaller than anticipated second quarter loss as a result of cost-cutting measures, the U.S.'s second-biggest oil company warned that its refining margins were sharply down on the first quarter. And weak sales reports from U.S. retailers and more pain in the country's labor market did little to lift the mood.

"Clarity is what markets seek, but this is not being provided by the economic data....this looks likely to remain the case over the coming week, perhaps consigning us to rather dull trading unless the U.S. earnings season can deliver a potent directional impulse," said Daragh Maher, an analyst at Calyon Credit Agricole.

Equities rose from the middle of March until the start of June on hopes that the U.S. economy in particular will recover from recession sooner than anticipated.

But disappointing economic news over the last few weeks, culminating in last week's worse than expected U.S. jobs report for June, has altered the mood prevailing among investors that a significant rebound in the U.S. was a possibility. Since peaking in early June, the S&P index and the Dow Jones industrial average have dropped around 7 percent.

Elsewhere in Asia, Hong Kong's Hang Seng fell 82.17, or 0.5 percent, to 17,708.42. South Korea's Kospi fell 0.2 percent and Shanghai's index shed 0.3 percent. Meanwhile, Australia's index gained 0.8 percent and Singapore's market fell 0.2 percent.

Oil prices were back down below $60 a barrel, with benchmark crude for August delivery falling $1.43 cents to $58.98 a barrel after earlier trading below $60. Over the last week or two, oil prices have slid more than $10 a barrel amid the waning economic optimism.

The dollar dropped 0.8 percent to 92.28 yen while the euro was 0.7 percent down at $1.3917.

The dollar was not affected by comments from a Chinese official Dai Bingguo that the world needs a "diversified and rational international reserve system." However, there was no direct reference to the dollar.