European and Asian stock markets dropped Wednesday ahead of expected losses on Wall Street amid concerns about the future of the U.S. automotive industry and ahead of crucial U.S. inflation and housing data.
The FTSE 100 index of leading British shares was down 77.02 points, or 1.8 percent, at 4,131.53, while Germany's DAX was 60.16 points, or 1.3 percent, lower at 4,519.31. The CAC-40 in France was down 49.37 points, or 1.5 percent, at 3,168.03.
U.S. stocks headed for a lower open with investors worried about the economic fallout if Detroit's Big Three automakers ¡ª General Motors Corp., Ford Motor Co. and Chrysler LLC ¡ª cannot persuade lawmakers to give them a $25 billion bailout.
Investors are concerned what would happen to the U.S. economy as a whole should any of the three collapse. Congressional Democrats have proposed using part of the $700 billion financial bailout package to pump into the ailing auto industry, but Republicans oppose such an approach.
Ahead of the market's open, Dow Jones industrial futures fell 131, or 1.57 percent, to 8,363, more or less erasing Tuesday's 150 point rally.
"With the immediate future of the U.S. automotive industry hanging in the balance, there is little wonder that risk aversion has been a notable theme in equity markets today," said Neil Mellor, an analyst at the Bank of New York Mellon.
In Europe, financial stocks were being beaten down once again following Citigroup Inc.'s announcement of massive job cuts earlier in the week, with BNP Paribas SA, Barclays PLC, Commerzbank SA and Deutsche Bank AG all sharply lower. However, potential merger partners HBOS PLC and Lloyds TSB PLC were higher as shareholders gathered to approve the tie-up.
Mining companies, such as Anglo American PLC, Rio Tinto PLC and Xstrata PLC, were also sharply lower as fears about the scale of the economic downturn around the world weighed on commodity prices.
Attention this afternoon will be squarely on two key U.S. economic releases.
The Commerce Department's report on new-home construction and building permit applications for October is expected to show declines for the fourth straight month as the housing sector is pulled down by falling prices, weak demand and a probable recession.
The report is expected to show that construction of new homes and apartments fell to an annual rate of 780,000 units in October from 817,000 units a month earlier.
The market will also examine a government report on how fast prices are falling in the U.S. Economists believe the Labor Department will report that consumer prices fell by 0.5 percent last month after an unchanged reading for September.
In Britain, deflation talk was not far away from the discussions at the last rate-setting meeting of the Bank of England, minutes to the meeting released Wednesday showed.
The bank's nine-member committee considered slashing interest rates by "possibly in excess of 200 basis points" or more than 2 percentage points to make sure that inflation did not undershoot the 2.0 percent inflation target over the medium term.
Though they opted instead for a 1.50 percentage point cut in the benchmark rate to 3.00 percent, its lowest in 54 years, the minutes have paved the way for another sharp interest rate reduction in December at the next meeting.
Earlier in Asia, Japan's benchmark Nikkei 225 average fell 55 points, or 0.7 percent, to 8,273.22 as investors digested a 64 percent slump in first-half earnings at the country's biggest bank, Mitsubishi UFJ Financial Group Inc.
Australia's main index fell 0.7 percent as crude oil traded near a 22-month low and metals prices fell overnight. Hong Kong's Hang Seng index declined 0.8 percent to 12,815.80.
China bucked the trend with the Shanghai Composite Index surging 6.1 percent to 2,017.47 as market heavyweight Petrochina rallied on expectations the government will allow fuel prices to be hiked next month.
Pessimism about the global economic outlook continued to take its toll on oil prices. Light, sweet crude for December delivery was down 0.27 cents at $54.12 a barrel in electronic trading on the New York Mercantile Exchange by early-afternoon London time. The contract Tuesday fell 56 cents to settle at $54.39, the lowest since January 2007.
The euro was up 0.2 percent at $1.2741 while the dollar was 0.2 percent lower at 96.73 yen.
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