Economic woes deepen as major stocks tumble

London/New York: US, European and most Asian stocks fell sharply on Monday amid renewed signs that the world economy is slowing down sharply.

US stocks extended losses as a report showing further contraction in a gauge of manufacturing activity added to worries about the deepening world economic slump.

Fears that the start of the 2008 holiday shopping season could herald the bleakest year-end season for retailers added to the negative tone, along with a slide in financial shares.

The Dow Jones industrial average was down 361.12 points, or 4.09 per cent, at 8,467.92. The Standard & Poor's 500 Index was down 42.15 points, or 4.70 per cent, at 854.09. The Nasdaq Composite Index was down 67.09 points, or 4.37 per cent, at 1,468.48.

The FTSE 100 index of leading British shares was down 113.61 points, or 2.7 per cent, at 4,174.40, while Germany's DAX was 136.26, or 2.9 per cent, lower at 4,533.18. The CAC-40 in France was 84.86, or 2.6 per cent, lower at 3,177.82.

Earlier, most Asian markets had closed lower with the benchmark Nikkei 225 stock average in Tokyo down 115.05 points, or 1.4 per cent, at 8,397.22 after advancing 7.6 per cent last week.

Markets in South Korea, Australia and Singapore also fell, while India's benchmark Sensex index reversed early gains, falling 2.8 per cent to 8,839.87 in the wake of the terrorist attacks in Mumbai.

"It's a poor start to December for equity markets, particularly as last week's rally had generated hopes of a turning point but the economic newsflow doesn't get any better; if anything it's getting worse," said Neil Mackinnon, chief economist at ECU Group.

Surveys of activity in the manufacturing sector in the euro zone and Britain were particularly poor yesterday. Both pointed to a sharper-than-expected contraction in output and stoked market expectations that the European Central Bank and Bank of England will cut interest rates aggressively later this week.

An equivalent survey into China's manufacturing sector also made for grim reading, generating fears that one of the main engines of global growth over the last few years is slowing down sharply.

Also weighing on sentiment were reports showing only modest gains in US retail sales on Black Friday - the traditional start of the American holiday shopping season following the Thanksgiving holiday.

According to preliminary figures released by ShopperTrak RCT, a research firm that tracks total retail sales at more than 50,000 outlets, sales rose 3 per cent to $10.6 billion (Dh38.93 billion) on Friday from the same day a year ago.

Elsewhere in Asia, stocks in Thailand reversed early gains as investors weighed prospects that the country's political crisis will be resolved soon. Anti-government protesters have occupied Bangkok's two main airports for nearly a week, cutting off air freight, stranding tourists and crippling the economy. The benchmark SET index fell 2.7 per cent to 390.92.

Bucking the trend were Hong Kong and mainland China, where key indexes rose on expectations of further measures by the Chinese government to boost the economy after last month's big interest rate cut.