LONDON (AFP) — European stock markets closed mixed Monday, recovering from early losses after another Asian sell-off on fears the US economy will fall into recession despite a radical interest rate cut last week.
Dealers said that after a brutal switchback ride, Asian investors were keen to take some profits from the pickup made late last week, which in turn encouraged sellers in Europe at the opening.
They said the tone was cautious ahead of this week's US Federal Reserve meeting after the US central bank dramatically slashed lending costs last Tuesday by three quarters of a percentage point.
That controversial medicine worked to steady nerves but the markets still wanted reassurance, especially in the fallout from the Societe Generale rogue trader scandal in France, which undercut Paris stocks badly.
However, as the day wore on, the markets recovered some of the lost ground, helped by a more positive showing on Wall Street after a sharp downturn there Friday of 1.38 percent despite more weak US housing data.
Investors were also waiting to hear what President George W. Bush would say in his State of the Union speech later Monday after the White House and Congress agreed last week on the outlines of an economic stimulus package.
In London, the FTSE 100 index shed 1.36 percent to close at 5,788.90 points while in Paris, the CAC 40 fell 0.61 percent to 4,848.30 points, with both markets having been down about two percent earlier.
In Frankfurt, the Dax was flat, edging up 0.03 percent to 6,818.85 points.
The Euro Stoxx 50 was down 0.49 percent at 3,758.45 points.
In New York, the Dow Jones Industrial Average climbed 0.38 percent and the tech-laden Nasdaq was 0.36 percent firmer while the broad-market Standard & Poor's 500 index rose 0.61 percent in late morning trade.
In Asia, fresh jitters about the outlook for the world economy seriously rattled markets, dealers said, with investors looking for safe havens such as bonds and gold -- which hit record highs in London above 927 dollars.
The Chinese market plunged 7.2 percent, with Hong Kong down 4.25 percent and Tokyo off nearly 4.0 percent.
"Recent volatility continues with worries over US recession weighing (on sentiment)," said one London based trader.
"The focus (Monday) is clearly on the reaction of European markets to weakness in Asia overnight and all eyes will turn towards Wednesday's Fed rate decision."
In London, weaker oil prices pushed the majors lower ahead of results in the sector led by Royal Dutch Shell, down 1.50 percent to 1,776 pence as BP lost 1.30 percent to 531 pence.
Miners too were hit by concerns over demand if the US economy falters, with Anglo American down 4.83 percent to 2,465 pence, Rio Tinto off 3.13 percent at 4,549 pence while BHP shed 1.62 percent to 1,394 pence.
Xstrata added 0.34 percent to 3,512 pence, continuing to find support from the prospect of an offer by Brazil's Vale.
In Paris, one dealer said the main feature is how earnings expectations are being cut back in light of the predicted economic slowdown and while that continues, shares will remain under pressure.
Societe Generale was lower again, falling 3.82 percent to 71.05 euros as more details came to light of the rogue trader scandal that cost it more than seven billion dollars.
Dealers said management was in the firing line and questions were being asked about its planned 5.5 billion euro capital increase needed to cover the damage.
Other banks were slightly firmer at the finish, with BNP Paribas up 0.27 percent to 65.19 euros and Credit Agricole adding 0.39 percent to 20.34 euros.
In Frankfurt, it was a similar day marked by worries over the US outlook.
Munich Re rose 1.39 percent to 113.98 euros after insisting that it faced no fresh problems in the US subprime home loan market.
Allianz added 1.78 percent to 123.78 euros on market speculation it might sell its banking interests.
Elsewhere in Europe, Milan's SP/Mib added 0.11 percent to 34,234 points, Madrid's Ibex-35 lost 0.87 percent to 13,026.70 points, Amsterdam's AEX was up 0.14 percent to 439.32 points, the Bel-20 in Brussels was 0.83 percent higher at 3,663.79 points and Switzerland's SMI was down 1.37 percent at 7,581.73 points.
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