World stock markets fall as G-20 eyes recovery

LONDON -- World stocks mostly fell Friday as investors looked to leaders of the Group of 20 rich and developing economies assembled in the U.S. for assurance that they will not stifle the global economic recovery by prematurely taking away stimulus measures.

In morning trading in Europe, Germany's DAX was down 0.2 percent at 5,593.55 and France's CAC 40 lost 0.1 percent at 3,754.57. Britain's FTSE 100 rose 0.4 percent to 5,098.30, helped by oil stocks that were boosted by gains in the price of crude after a two-day plunge.

Asian markets closed down, with Tokyo the heaviest loser -- down 2.6 percent -- and Wall Street was set to open marginally higher after markets fell Thursday. Investors had pulled out of stocks amid worries about the sustainability of this year's rally and news of an unexpected drop in sales of existing homes in August.

Investors are increasingly nervous that governments will unwind emergency measures that have helped money flow through financial markets since the crisis erupted last year. This week, the U.S. Federal Reserve announced it would slow its purchases of mortgage-backed securities, while the European Central Bank said it would curtail certain types of dollar-denominated loans.

"Investors are a bit nervous after the run the markets have had, which is entirely rational," said David Hussey, head of European equities at MFC Global Investment Management. "We have had a bit of a sell-off this week. The market's probably got a bit overextended in the short term and there has been retrenchment across the board, in America, Asia and Europe has followed that."

Amid the concern, G-20 leaders were gathered for a two-day meeting in the U.S. dedicated to bringing about a strong and sustainable turnaround after the world's worst downturn in decades. Both President Obama and British Prime Minister Gordon Brown said nations should not move too quickly to end low-interest rates, stimulus spending and other props.

"Much of the gains across asset classes so far this year -- to levels not justified by fundamentals -- have been a direct result of cheap and easily available funding," Dariusz Kowalczyk, chief Investment strategist for SJS Markets in Hong Kong, wrote in a note. "News that the amount and availability of liquidity will be imminently limited caused fears that asset bubbles will be diffused sooner."

With little economic and corporate data due for release in Europe, investors were awaiting figures on U.S. durable goods orders in August, due later Friday.

"Anything that gives traders cause for concern -- and an unexpected decline in durable goods would do precisely this -- could easily act as the trigger to take more money off the table ahead of the weekend break," said Anthony Grech, market strategist at IG Index.

In Japan, the Nikkei 225 stock index shed 278.24 points, or 2.6 percent, to 10,265.98 after Nomura, the country's leading brokerage, announced its biggest shares sale ever, weighing on the broader market.

Hong Kong's Hang Seng lost 0.1 percent to 21,024.40, and China's Shanghai index dropped 0.5 percent.

Elsewhere, South Korea's Kospi shed 0.1 percent, India's Sensex edged lower by 0.1 percent and Indonesia's index lost 1.0 percent. Taiwan and Australia's markets were up 0.3 percent.

Overnight on Wall Street, the Dow fell 41.11, or 0.4 percent, to 9,707.44.

The S&P 500 index fell 10.09, or 1.0 percent, to 1,050.78, and the Nasdaq composite index fell 23.81, or 1.1 percent, to 2,107.61.

Oil prices clawed back some losses, with benchmark crude for November delivery up 34 cents at $66.23 in European trade.