World Stock Markets Sink On US, Europe Worries

PAMELA SAMPSON

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.

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