World stocks, oil down amid waning recovery hopes

LONDON — World stock markets and oil prices fell Monday amid concerns that any recovery in the global economy will be a long, hard slog despite some encouraging U.S. economic data.

In Europe, the FTSE 100 index of leading British shares closed down 41.37 points, or 1 percent, at 4,194.91, while Germany’s DAX declined 56.39 points, or 1.2 percent, to 4,651.82. The CAC-40 in France was 37.35 points, or 1.2 percent, lower at 3,082.16.

On Wall Street, the Dow Jones industrial average was down 38.62 points, or 0.5 percent, at 8,242.12 around midday New York time, while the broader Standard & Poor’s 500 index fell 5.83 points, or 0.7 percent, at 890.59.

Monday is the first trading day in the U.S. since last Thursday, when U.S. stocks were sold off in the wake of worse-than-expected nonfarm payrolls data, which showed U.S. employers slashed 467,000 jobs in June — 100,000 more than anticipated.

The pessimism that the unemployment data engendered continued even after the Institute of Supply Management said the recession in the non-manufacturing part of the U.S. economy was easing. Its main index rose to a nine-month high of 47.0 in June from 44.0 in May. Any reading below 50 indicates a contraction in activity, but the closer to 50 the less the contraction.

“The markets are still downbeat after last week’s worse-than-expected U.S. unemployment numbers, and, although today’s data for the U.S. service sector was better than expected, it wasn’t startling enough to stop Wall Street sliding,” said David Jones, chief market strategist at IG Index.

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. Many investors saw stock valuations as particularly cheap and started buying. The S&P 500 index in the U.S. rose around 16 percent during the second quarter, its best performance since 1998, amid hopes of a global recovery despite worries about the banking system, public finances and the length and depth of the recession.

But disappointing economic news over the last few weeks brought an abrupt end to the rally and altered the general mood prevailing among investors that a V-shaped recovery in the U.S. was a distinct possibility. A sharp rebound in U.S. economic activity will not emerge until rises in unemployment ease.

The start of the second-quarter earnings reporting season will provide some clues as to whether companies have already seen the worst of the recession. U.S. aluminum giant Alcoa Inc. opens earnings season on Wednesday.

“Markets have rallied throughout Q2 on the back of strong growth expectations but if the cyclical rebound fails to materialize due to structural problems, especially in the U.S., markets may correct sharply,” said Geoffrey Yu, an analyst at UBS.

Earlier in Asia, Japan’s Nikkei 225 stock average fell 135.20, or 1.4 percent, to 9,680.87 and Hong Kong’s Hang Seng dropped 226.23, or 1.2 percent, to 17,977.17 in a choppy session.

Elsewhere, Australia’s index lost 1.2 percent and Singapore’s market closed off 1.2 percent.

Defying the region’s losses, South Korea’s Kospi added 0.6 percent after Samsung Electronics Co., the world’s biggest manufacturer of memory chips, announced quarterly profit estimates for the first time. The company estimated operating profit would come it at between 2.2 trillion won and 2.6 trillion won, compared with 2.4 trillion won last year.

In mainland China, the benchmark Shanghai Composite Index closed up 1.2 percent at 3,124.67, a 13-month high.

Thailand’s stock market is closed Monday and Tuesday.

Oil prices tumbled amid the global economic uncertainty, with benchmark crude for August delivery down $2.57 to $64.16 a barrel. Last week, oil hit an eight-month high above $73.

The dollar fell 1.2 percent to 94.85 yen while the euro dropped 0.2 percent $1.3931.

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AP Business Writer Jeremiah Marquez in Hong Kong contributed to this report.