World markets stung by banking worries

LONDON — World stock markets mostly fell Tuesday amid renewed concerns about the banking sector after Britain’s Royal Bank of Scotland got more government help and Switzerland’s UBS AG booked another massive charge.

Uncertainty about a raft of key economic announcements later this week, culminating in Friday’s crucial U.S. payrolls report, kept a lid on sentiment, too, though the $34 billion takeover of Burlington Northern Santa Fe Corp. by Warren Buffett’s Berkshire Hathaway Inc. helped ease the selling pressure.

In Europe, Britain’s FTSE 100 index of leading British shares closed down 60.00 points, or 1.2 percent, at 5,044.50 while Germany’s DAX fell 66.36 points, or 1.2 percent, to 5,364.46. The CAC-40 in France was 49.62 points, or 1.4 percent, lower at 3,589.84.

On Wall Street, the Dow Jones industrial average was down 45.04, or 0.5 percent, to 9,744.40 while the broader Standard & Poor’s 500 index fell 4.08, or 0.4 percent, to 1,038.80.

Before Berkshire Hathaway’s takeover deal was announced, world stocks had been even lower — investors are reassured by news of mergers and acquisitions as they indicate confidence in stock values and the economic outlook.

In Europe, most investors’ attention focused on the banks, particularly Lloyds Banking Group PLC and Royal Bank of Scotland PLC in Britain.

Royal Bank said that it was taking an additional 25 billion pounds from the government and joining the government’s Asset Protection Scheme. Meanwhile, Lloyds confirmed it was looking to raise at least 21 billion pounds ($34.2 billion) through a record share issue and debt swap, instead of joining the insurance scheme.

As a result, the pair faced differing reactions in the markets. While shares in Royal Bank of Scotland slid 5.9 percent, Lloyds was up 3.4 percent.

Results from UBS kept the banks in focus across Europe. The Swiss bank reported a third-quarter net loss of 564 million Swiss francs ($542 million) — its fourth straight quarterly loss — after 2.15 billion francs in accounting charges. UBS shares fell 5.8 percent on the Zurich exchange.

It wasn’t just the banks causing concern in Europe, however. German carmaker BMW AG saw its share price close down 6.3 percent after it reported a bigger than expected 74 percent decline in third quarter net income.

Many analysts think that the markets are at a crucial juncture and that stocks, which have rallied for most of the year, could be facing a year-end slide. Over the last couple of months, most of the dips have proved to be short-lived.

“At the moment however, it seems that traders do not have the same conviction that they have displayed previously and rallies from here are proving to be unsustainable,” said David Jones, chief market strategist at IG Index.

Economic matters will be at the forefront of traders’ attention this week. In particular, they will be looking to see what the U.S. Federal Reserve, the European Central Bank and the Bank of England say about the world economy when they announce their latest interest rate decisions.

Though all three central banks are expected to keep their benchmark rates at historic lows, investors will be focusing on what they say about economic prospects and when extraordinary measures to boost the world economy will start to be unwound. The Bank of England is the only one that may well change current policy, with most analysts now predicting that it will increase the amount of money it pumps into the economy.

On Friday, investors will pay particular attention to the U.S. jobs report for October, which often sets the stock market tone for a week or two.

In Asia, a quarter point interest rate hike in Australia failed to inspire investors with the same confidence as last month’s. October’s rate hike, the first in a major economy since the onset of the crisis, was greeted as evidence of an improving world economy. Australia’s S&P/ASX 200 closed down 0.2 percent.

Elsewhere, Hong Kong’s Hang Seng led Asia’s losses, falling 1.8 percent while South Korea’s Kospi was down 0.6 percent. Japan’s market was closed for a holiday.

China’s Shanghai index bucked the trend, gaining 1.2 percent, with sentiment still boosted by a weekend report that manufacturing expanded for an eighth straight month in October.

Benchmark crude for December delivery rose 13 cents to $78.26 a barrel. The contract rose $1.13 to settle at $78.13 on Monday.

The dollar was flat at 90.27 yen while the euro dropped 0.8 percent to $1.4645.

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AP Business Writers Pan Pylas in London and Stephen Wright in Bangkok contributed to this report.