World stocks fall on Europe debt worries, IMF view

TOBY STERLING, AP Business Writer

AMSTERDAM -- World stock markets fell Tuesday on a gloomy forecast from the IMF and worries over Europe's debt crisis ahead of the start of earnings season.

The International Monetary Fund said confidence in the global financial system "remains exceptionally fragile" and it cut its estimates for global economic growth, warning that mature economies are at risk of recession. Europe's debt crisis continued to be a central theme, with yields on Spanish government bonds moving higher Tuesday even as European finance ministers meeting in Luxembourg said the country doesn't need a bailout.

"The IMF has predicted that Spain will miss its deficit and debt targets in 2012 and 2013, which underpins fears that already prevailed in the market," said Rabobank currency strategist Jane Foley.

Britain's FTSE 100 fell 0.5 percent to 5,810.25. Germany's DAX lost 0.8 percent to 7,234.53 and France's CAC-40 closed down 0.7 percent at 3,382.78.

Wall Street opened slightly lower and then fell further mid-morning. The Dow Jones Industrial index was down 0.6 percent to 13,500.67, and the S&P 500 was off 0.7 percent to 1,446.20. Aluminum maker Alcoa will be the first major U.S. company to report third quarter earnings later Tuesday.

In Asia the picture was mixed, as Chinese stocks rose on news the country's central bank has injected an estimated 265 billion yuan ($42 billion) into the money supply in what analysts said was the second-biggest such move to date.

In addition, China's sovereign wealth fund said it is buying millions of shares in Industrial & Commercial Bank of China, the world's biggest bank by market capitalization.

Mainland China's Shanghai Composite Index climbed 2 percent to 2,115.23, with financial and energy-related stocks gaining most, while Hong Kong's Hang Seng rose 0.5 percent to 20,937.28.

Australia's S&P/ASX 200 also gained, up 0.5 percent to 4,505.30 on hopes of upcoming interest rate cuts.

But other Asian shares were down. South Korea's Kospi fell 0.1 percent to 1,979.04. Japan's Nikkei 225 index tumbled 1.1 percent to 8,769.59, reopening after a holiday. Benchmarks in Singapore, Taiwan, Thailand and New Zealand also fell.

Some analysts suggested that Asia still remains a bright spot in the global economy and that investors should keep the big picture in mind.

"Asia has grown nearly 32 (percent) in the four years since Lehman Brothers collapsed," analysts at DBS Bank Ltd. in Singapore said in a market commentary. "That's how big Asia is today and how fast it is growing. A weak Europe will never be a plus for Asia. But it's never mattered less either."

Meanwhile, benchmark oil for November delivery was up $2.83 to $92.16 per barrel in electronic trading on the New York Mercantile Exchange.

In currencies, the euro fell on worries about Spain, pessimistic remarks by ECB President Mario Draghi about Europe's "uphill" economic prospects, and a hostile atmosphere during a visit by German Chancellor Angela Merkel to Athens. It declined to at $1.2877 from $1.2928 late Monday in New York.

The dollar was slightly lower against the yen at 78.24 yen from 78.34 yen.