World stocks down on slow euro bank union progress

World stock markets fall after talks on Europe banking union fail to produce concrete plan

Associated Press

BANGKOK (AP) -- World stock markets mostly fell Tuesday as signs that Europe will take longer than expected to set up a new authority to supervise European banks kept investors on the sidelines.

The creation of a European banking union is important to prevent any bank failures from torpedoing the finances of financially weak countries such as Spain or Italy. But a meeting among European finance ministers over the weekend underscored the lack of consensus on the details of such a union.

"It appears that markets have to wait longer than expected to get clarity on Greece, Spain and the banking supervision. This continued delay could put downward pressure on the euro and other risk assets," said Stan Shamu of IG Markets in Melbourne, Australia.

European stocks slid in early trading. Britain's FTSE 100 lost 0.9 percent to 5,838.39 and Germany's DAX shed 1.2 percent to 7,316.46. France's CAC-40 lost 1.2 percent to 3,509.73. Wall Street headed for a lower opening, with Dow Jones industrial futures slipping 0.2 percent to 13,437 and S&P 500 futures losing 0.3 percent to 1,450.

Losses began earlier in the day in Asia. Japan's benchmark Nikkei 225 index fell 0.4 percent to 9,123.77. Hong Kong's Hang Seng lost 0.3 percent to 20,601.93 and Australia's S&P ASX/200 fell 0.2 percent to 4,394.70.

Benchmarks in Singapore, Indonesia and Taiwan also fell. Mainland China's Shanghai Composite Index fell 0.9 percent to 2,059.54 while the smaller Shenzhen Composite Index lost 0.6 percent to 859.44.

Bucking the trend was South Korea's Kospi, which gained 0.1 percent to 2,004.96.

Late last week, the U.S. Federal Reserve — faced with a struggling recovery in the world's biggest economy — announced plans to buy $40 billion of mortgage bonds a month for as long as necessary as part of a strategy to boost borrowing and spending. The Fed also extended its pledge to keep short-term interest rates low until 2015, a year longer than its previous target.

The size of the program buoyed confidence in the global economy, and stocks rallied. Since then, however, investors have begun to re-examine the big picture and to see substantial headwinds on the horizon.

"I think the outlook in the near term for the global economy is still fairly negative," said Peter Elston, strategist at Aberdeen Asset Management in Singapore. "I suspect that further weakness is just around the corner, which might explain the greater than expected easing by the Fed."

Among individual stocks, Australian iron ore miner Fortescue Metals Group soared 17.1 percent after the company said it secured a new $4.5 billion credit facility to refinance its looming bank debts.

Fortescue requested a trading halt on Friday after its share price tumbled almost 14 percent on media reports that it was struggling to meet interest payments on its debt.

Benchmark oil for October delivery was down 25 cents to $96.37 per barrel in electronic trading on the New York Mercantile Exchange. The contract fell $2.38, or 2.4 percent, to finish at $96.62 a barrel on the Nymex on Monday.

In currencies, the euro fell slightly to $1.3088 from $1.3107. The dollar fell to 78.64 yen from 78.74 yen.

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