World stocks mostly lower as economic fears weigh

LONDON (AP) -- European markets plunged Friday after economic data showed the U.S. economy shrank in the fourth quarter at the fastest pace in over a quarter century.
Market sentiment was also weak as investors worried about banks' strength and pharmaceutical companies, whose profits some believe may be curbed by President Obama's plan to reform America's costly health care system.

In European afternoon trading, Britain's FTSE 100 fell 3.6 percent to 3,773.46, Germany's DAX lost 4.1 percent to 3,782.39, and France's CAC 40 dropped 3.3 percent to 2,654.52.

Wall Street pointed to a sharply lower open after Citigroup Inc. said the government would take a bigger stake in the company and news that the U.S. economy shrunk at a faster-than-expected 6.2 percent pace at the end of 2008, its worst performance in a quarter-century.

Dow Jones industrial average futures fell 1.3 percent to 7,091. Standard & Poor's 500 index futures lost 1.4 percent to 741.50, while Nasdaq 100 index futures slipped 0.9 percent to 1,119.50.

Analysts said the U.S. gross domestic product figures were unlikely to improve.

"With the incoming economic data only getting worse, no further benefit to be had from plummeting energy prices, and the fiscal stimulus not arriving until the second quarter, the contraction in the first quarter could be equally as bad," said Paul Ashworth, of Capital Economics in London.

In Europe, shares in pharmaceuticals AstraZeneca fell 6.2 percent, Sanofi-Aventis lost 6 percent and GlaxoSmithKline slid 3.2 percent, following Thursday's announcement of Obama's first budget, which aims to foster generic competition for costly biotech drugs, cutting costs for government programs, employers and patients.

"People are realizing that health care is not the great defense in a downturn that it's claimed to be," said Stephen Pope, chief global markets strategist for Cantor Fitzgerald. "With the Obama plan, it's a scheme where Medicare will no longer ask the providers 'what does that cost and yes we'll take it,' they will turn around and say 'this is what we're prepared to pay.'"

Bank stocks also plummeted, led by Lloyds Banking Group, which fell 26 percent. It reported that profits shrank to 819 million pounds in its Lloyds TSB unit in 2008, while the recently acquired Halifax/Bank of Scotland lost 7.5 billion pounds ($10.6 billion) over the year.

The expanded group said it was still negotiating with the British government on terms for insuring questionable assets -- a program that enables struggling banks to access government insurance against future losses on toxic assets. Royal Bank of Scotland said Thursday it would dump 325 billion pounds of bad assets into the program, which the British government hopes will boost lending by reducing banks' uncertainty about the value of past investments.

"People are now looking across to other banks, in Germany, Switzerland and Italy, and there's a sense of will they have to go down a similar route and what cost are they going to have to bear for this fund creation and 'bad bank' creation," said Pope.

European bank stocks as a collective are down 25 percent since the beginning of the year, according to Pope. But the worst sector is autoparts, down 41 percent, which is "really beholden" to the auto-manufacturers sector, itself down 22 percent.

In Asia, stock markets were mixed. Trade was listless after a bruising, volatile month that saw the region's export-driven economies sink deeper into recession amid collapsing demand.

Figures showed Japan's industrial production plunged a record 10 percent in January from December.

Until there was evidence that sweeping government measures to jump-start the global economy were starting to take effect, equities markets were likely to remain lackluster, traders said.

"Confidence remains really beaten up," said Miles Remington, head of Asian sales trading at BNP Paribas Securities in Hong Kong. "Internationally the picture is very negative. A lot of people are very happy to be sitting on the sidelines."

The Nikkei 225 stock average rose 1.5 percent to 7,568.42, with Sony Corp. shares up 2 percent after it said its president was stepping down.

In Hong Kong, the Hang Seng pulled back 0.7 percent and South Korea's Kospi rose 0.8 percent.

Elsewhere, China's Shanghai benchmark dropped 1.8 percent and slumping economic growth figures sent India's main index down 0.7 percent. Singapore sank, Taiwan gained.

Oil prices weakened in European trade after an overnight rally. Light, sweet crude for April delivery down $2.02 at $43.20 a barrel. On Thursday, the contract jumped $2.72, or 6.4 percent, to settle at $45.22 on the New York Mercantile Exchange.