World stock markets sink on US, Europe worries

BANGKOK (AP) ? World stocks fell Friday after credit downgrades slapped on Spanish banks unnerved investors already worried about the stability of the 17-country euro currency union.

The fall in European shares followed a sharp downturn in Asia where markets were also rattled by weak U.S. manufacturing figures.

The nervousness about Spain's banks comes as the European financial crisis intensifies.

Political turmoil in Greece has increased the likelihood that it could leave the 17-country monetary union, a move that could have ripple effects throughout Europe and the world's financial markets.

Britain's FTSE 100 fell 0.8 percent to 5,295.30 and Germany's DAX was 0.5 percent lower at 6,279.36. France's CAC-40 lost 0.7 percent to 2,991.85.

But Wall Street looked set for a higher opening on Friday when shares of social media giant Facebook will start trading. Buyer demand is expected to be very strong. Dow Jones industrial futures rose 0.2 percent to 12,439 and S&P 500 futures added 0.2 percent to 1,304.40.

Markets were jolted by Moody's downgrade Thursday of 16 Spanish banks, said Jackson Wong, vice president at Tanrich Securities in Hong Kong.

Moody's said it took the action because the banks face a rising tide of bad loans linked to Spain's recession, a gloomy real estate market and high unemployment.

"It's very hard to predict how the euro crisis will evolve. All the news is bad, so investors like to stay on the sidelines even though stocks are very attractive right now," Wong said.

Japan's Nikkei 225 tumbled 3 percent to close at 8,611.31, its lowest finish in four months as signs of weakness in the U.S., a critical export market for Japanese companies, battered some of the country's behemoth manufacturers.

Hong Kong's Hang Seng dropped 1.3 percent to 18,951.85 and Australia's S&P/ASX 200 slid 2.7 percent to 4,046.50. South Korea's Kospi tumbled 3.4 percent to 1,782.46. Benchmarks in Singapore, Taiwan and New Zealand also fell.

Mainland Chinese shares lost ground, with the benchmark Shanghai Composite Index losing 1.4 percent to 2,344.52. The Shenzhen Composite Index fell 1.5 percent to 940.91. Shares in ports and trading related companies led the gains, while shares in banks, shipping and defense industry companies weakened.

"The investors are pessimistic over China's economic outlook, on top of the problems in Europe. It is more like a panic selling," said Guo Yanhong, an analyst at Huachuang Securities, based in Beijing.

In the U.S., meanwhile, the Federal Reserve Bank of Philadelphia said Thursday that its index of factory activity fell to minus 5.8 from 8.5 in April. Any reading below zero indicates contraction. Measures of new orders and employment also fell in May, the bank said. That suggests manufacturers in the region are cutting jobs.

Among individual stocks, Japanese vehicle makers were hit hard. Yamaha Motor Co. tumbled 5 percent and Mitsubishi Motors Corp. was down 5.1 percent. Toyota Motor Corp. lost 3.7 percent.

Asiana Airlines Inc., South Korea's second-largest carrier, plunged 5.1 percent after reporting that its earnings slid in the first quarter of 2012 from a year earlier, mainly due to soaring fuel prices, Yonhap News Agency said.

Gold miners were among the gainers. Australia's Newcrest Mining rose 3.8 percent on rising prices for the precious metal. Hong Kong-listed Zijin Mining Group Co., China's largest gold miner, rose 3.4 percent.

Benchmark oil for June delivery was down 1 cent to $92.55 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell 25 cents to settle at $92.56 in New York on Thursday.

In currencies, the euro fell to $1.2686 from $1.2714 late Thursday in New York. The dollar rose slightly to 79.30 yen from 79.28 yen.

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Follow Pamela Sampson on Twitter at http://twitter.com/pamelasampson

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AP researcher Fu Ting contributed from Shanghai.

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