PARIS (AP) — Evidence that Europe's debt crisis is continuing to drag down economies both on the continent and in the U.S. pushed world stock markets lower Tuesday ahead of an emergency conference call about the crisis.
A private discussion among finance ministers and central bank governors from seven of the world's most industrialized powers is expected later in the day. U.S. officials have said Washington expects more action to strengthen the European banking system in the next two weeks before a meeting of the Group of 20 major economies in Los Cabos, Mexico, later this month.
Concerns about Europe — and particularly the worry that the sorry state of Spain's banks may force the country to seek a bailout — have increasingly weighed on the economies of both the U.S. and the countries that use the euro. Spain, strapped for cash, might have to tap European Union rescue funds, but it is reluctant to do so because such aid would come with strict conditions.
Meanwhile in Cyprus, the central bank governor said the country is struggling to find €1.8 billion ($2.2 billion) to inject into its second-largest lender, Cyprus Popular Bank, by June 30. That means it is increasingly likely to have to accept EU rescue funds.
The crisis has stopped a nascent U.S. economic recovery in its tracks and refused to let Europe get off the ground. U.S. factory orders fell back on Monday, dovetailing with the recent weak jobs data, while a European business survey sounded a dismal note Tuesday. Markit's Purchasing Managers' Index for the eurozone hit a near-three-year low in May. Even Germany was below the 50 mark, which indicates a contraction.
Stocks in Asia and Europe rose gingerly in early trading Tuesday, but the bad news soon proved overwhelming.
Germany's DAX retreated 1 percent to 5.922, while France's CAC-40 eked out some gains, rising 0.4 percent to 2,967. Markets in London were closed for a second day for the Queen's Jubilee celebrations.
The euro fell back 0.6 percent to $1.2429
U.S. markets also looked set to open lower. S&P futures fell 0.2 percent to 1,271, while Dow futures edged down 0.03 percent to 12,059.
"The eurozone is being buffeted by major headwinds, notably including increased fiscal tightening in many countries, squeezed consumer purchasing power and markedly rising unemployment," said Howard Archer, chief European economist for IHS Global Insight.
"Meanwhile, the heightened Greek and Spanish tensions are magnifying the problems by weighing down on already weak and fragile business and consumer confidence, adding to uncertainty about the outlook and holding back business and investment decisions."
Earlier in Asia, stock markets rose following a move by Chinese authorities to boost consumption.
Japan's Nikkei 225 index rose 1 percent to 8,382 after suffering sharp losses the day before. Hong Kong's Hang Seng added 0.4 percent to 18,259.03 and South Korea's Kospi gained 1.1 percent to 1,801.85.
Mainland Chinese shares were mixed. The benchmark Shanghai Composite Index gained 0.2 percent to 2,311.92. The Shenzhen Composite Index lost 0.2 percent to 937.39.
With economies faltering, energy prices dropped, amid expectations demand would be hit. Benchmark oil for July delivery fell 10 cents to $83.88 per barrel in electronic trading on the New York Mercantile Exchange.
source: nytimes.com
