World stocks fall on worries over Europe after Spain warned of downgrade, China slowdown

World stocks down on Europe, China growth doubts

ROME — Global stock markets fell Thursday after weak manufacturing surveys provided new evidence that the world’s biggest economies, from the U.S. to China and Europe, are slowing.

The euro, however, gained ground against the dollar — trading 1.3 percent higher at $1.2387 — on signs that European banks are less strapped for cash than feared.

The FTSE 100 index of leading British shares slid 0.7 percent to 4,882.34. Germany’s DAX was down by 0.5 percent to 5,935.44, while France’s CAC-40 was 1.57 percent lower at 3,388.72.

Wall Street looked to follow the decline after receiving more grim data pointing to weakness in the jobs market.

Futures fell Thursday after the Labor Department said initial jobless claims rose unexpectedly last week to a seasonally adjusted 472,000. Economists polled by Thomson Reuters had forecast claims would fall to 452,000.

Ahead of the opening bell, Dow Jones industrial average futures fell 12 points, or 0.1 percent, to 9,704. Standard & Poor’s 500 index futures fell 2.00, or 0.2 percent, to 1,024.60.

Negative manufacturing news out of China took the wind out of markets already smarting from Wall Street’s slide overnight on news that U.S. consumer confidence dived in June. The purchasing managers’ index in China declined to 52.1 in June, its lowest since February, indicating a cooling economy and dashing “any hopes that the Chinese economy would somehow come to the rescue with respect to risk appetite,” said Michael Hewson of CMC Markets.

That news was followed quickly by confirmation that the eurozone’s manufacturing activity lost momentum for a second month running in June, disappointing news since the manufacturing sector had been the most dynamic.

“The second successive drop in the PMI in June suggests that the eurozone’s manufacturing upturn may now be flagging,” said Howard Archer, chief European economist at IHS Global Insight. “This could be partly due to inventory corrections drawing to a close in some countries, but it may also be a sign that the eurozone debt crisis and an associated intensified tightening of fiscal policy in a number of countries is having a dampening impact on economic activity.”

A day after receiving a warning about its credit rating, Spain reassured markets by successfully raising euro3.5 billion ($4.3 billion) Thursday in an oversubscribed bond sale.

A Treasury official said the oversubscription ratio showed the Moody’s warning went “totally unnoticed.”

Moody’s upset the markets when it said late Wednesday it has placed Spain’s AAA sovereign rating under review for a possible downgrade because of worsening economic prospects. Hewson said the move would not have come as a surprise and had probably already been priced into the markets.

A key central bank report released Thursday showed business confidence among Japan’s biggest manufacturers improved for a fifth straight quarter, but the Tokyo market was taking its cues from Wall Street, which closed out a painful second quarter Wednesday, leaving investors with heavy losses.

Japan’s benchmark Nikkei 225 stock index closed down 191.04 points, or 2 percent, to 9,191.60 — a seven-month low and extending losses from Wednesday’s fall of nearly 2 percent.

On Wall Street, stocks had their worst quarterly performance since the financial crisis. The Standard & Poor’s 500 index, considered by many professional investors to be the best measure of the market’s health, lost 11.9 percent for the quarter. The Dow Jones industrial average lost 10 percent. Both indexes are at their lows for 2010.

South Korea’s Kospi index shed 0.7 percent, and Australia’s S&P/ASX 200 tumbled 1.5 percent. The Shanghai CSeng Index was closed for a public holiday.

Markets in Singapore, Malaysia and Taiwan also fell. Hong Kong’s Hang yen in New York late Wednesday.

In currencies, the dollar fell to 88.02 yen from 88.36 omposite Index lost 1 percent to 2,373.79.

Benchmark crude for August delivery was down $1.02 to $74.61 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell 31 cents to settle at $75.63 on Wednesday.