European stock exchanges wilt, dragged down by US consumer confidence

European stock exchanges wilted yesterday, dragged down by a disappointing report on US consumer confidence and a fall in oil prices.

The London FTSE 100 index shed 0.76 per cent to close at 4,127.17 while in Paris the CAC 40 fell 1.41 per cent to finish at 2,983.1. The Frankfurt Dax slipped 1.16 per cent to 4,576.31.

Elsewhere in Europe there were declines of 1.27 per cent on the Swiss Market Index, 1.04 per cent in Madrid, 1.58 per cent in Amsterdam and 0.23 per cent in Brussels.

US stocks sputtered in early trade yesterday with investors fretting over fears that recovery from the global recession remains distant.

The blue-chip Dow Jones Industrial Average had fallen 1.08 per cent to 8,094.90 by mid-day while the tech-heavy Nasdaq was down 0.56 per cent at 1,742.82.

Ahead of the opening, the government said the US trade deficit narrowed sharply in May to its lowest level in nearly a decade, led by a plunge in imported oil.

The deficit fell nearly 10 per cent in May to a seasonally adjusted 26.0 billion dollars, the lowest level since November 1999.

The news appeared moderately positive for the US economy but also reflected weakness in overall global trade.

Patrick O'Hare at Briefing.com said that "the impetus for the weak tone this morning was the weak finish yesterday, along with a report that China's exports declined for the eighth straight month."

He said this "is diluting some of the hope that China's domestic red shoots will germinate the green shoots of a global recovery."

The economic outlook "has most folks confused," said Al Goldman at Wells Fargo Advisors.

"We believe the data suggests that the end of the recession is near - that's the good news for investors. However, the data also appears to indicate, as we have been saying for a month, that a strong economy is not just around the corner."

In Europe market analysts said sentiment was also depressed by the University of Michigan US consumer confidence index, which plunged to 64.6 points this month from 70.8 in June, a far sharper fall than had been expected.

In London weaker commodity prices sent mining issues lower. Rio Tinto lost 3.33 per cent to finish at 1,901.50 pence while Xstrata gave up 2.10 per cent and closed at 597 pence.

With crude prices sliding, oil-related stocks came under selling pressure in Paris.

Total fell 1.68 per cent to 35.98 euros, Technip lost 6.35 per cent to close at €32.76 and CGG Veritas shed 4.39 per cent to end the week at 10.87.

Telecom equipment maker Alcatel-Lucent gave up 3.49 per cent to close at €1.49 after announcing a new plan to cut 1,000 jobs in France by next year.

In Frankfurt, Lufthansa gave up 1.66 per cent to reach €8.58 on news that its bid for Austrian Airlines had stalled after the EU's anti-trust watchdog ruled that the German flag carrier had failed to address competition concerns raised by the acquisition.

Energy giant EON fell 1.63 per cent to €22.88. One of the day's leading gainers, steel maker Salzgitter, added 1.23 per cent to reach €59.37 after Citigroup raised its recommendation on the share.

Asian dealers remained cautious yesterday, with markets finishing the week mixed and looking for clues to an economic recovery ahead of the second-quarter earnings season.

Toyko edged 0.04 per cent lower, the eighth consecutive trading day of losses for the Nikkei, while Hong Kong lost 0.46 per cent and Shanghai 0.29 per cent.

However, there were gains in Sydney, which added 0.82 per cent, as Taipei dipped 0.32 per cent.