Global stock markets were narrowly mixed in volatile, uncertain trade yesterday, finding some support from positive US manufacturing data after early losses on continued European debt concerns.
Dealers said that with London and New York closed on Monday for public holidays, Asian investors yesterday were left to their own devices and reacted badly to a fall in Chinese manufacturing readings while Europe's debt problems continued to weigh on sentiment.
Europe opened weaker in turn and chalked up heavy losses through the day after a European Central Bank warning that the commercial banks need to make further massive write-downs to put their books in order.
The falls gathered momentum on news that European manufacturing sector growth slowed in May, compounding the negative Chinese lead, and record EU unemployment only added to the gloom.
Losses of nearly 17 per cent for BP put heavy pressure on London as the cost for the British energy giant of so far being unable to cap a broken oil well in the Gulf of Mexico soared to nearly a billion dollars.
US stocks opened weaker but then found support from news the US manufacturing sector grew for a 10th consecutive month in May, suggesting a modest economic recovery remained on track.
In Europe, the picture was mixed to lower, with London's benchmark FTSE 100 index of leading shares down 0.49 per cent at 5,163.3 points.
In Paris, the CAC 40 slipped 0.13 per cent to 3,503.08 points but in Frankfurt the DAX gained 0.28 per cent to 5,981.27 points.
Several markets were earlier down more than two per cent, especially after the ECB write-down warning hit the banks badly.
The ECB said in its latest Financial Stability Review that banks faced several challenges, including exposure to a weakening commercial real estate market, hundreds of billions of euros in bad debts, and possible competition for refinancing from with governments also trying to raise funds.
Banks would need to refinance long-term debt of around €800 billion by the end of 2012, the ECB said, adding that this combined with government borrowing could squeeze the credit markets.
Stocks were weaker in Asian trade earlier yesterday after official data showed China's purchasing managers index slipped in May to 53.9 from 55.7 in April.
Tokyo lost 0.58 per cent, Hong Kong tumbled 1.36 per cent and Shanghai shed 0.92 per cent.
"Investors around the globe still look to China to lead the global recovery and whenever there's a bit of poor economic data from them it usually leads to a sell-off in equities," said Capital Spreads analyst Simon Denham.On Wall Street, the blue-chip Dow Jones Industrial Average was up 0.17 per cent at around 1615 GMT but the tech-rich Nasdaq Composite fell 0.22 per cent.
Analysts at Charles Schwab & Co. noted "some disappointing manufacturing reports out of China, which exacerbated already wavering global economic recovery sentiment."
Harm Bandholz of UniCredit said the US manufacturing figures showed continued demand abroad was a key factor, with export orders at a 22-year high.