World stock markets mostly fell on Tuesday amid renewed concerns about the banking sector after Britain's Royal Bank of Scotland PLC got more government help and Switzerland's UBS AG booked another massive charge.
Uncertainty about a raft of key economic developments later this week, which culminates in Friday's closely watched U.S. nonfarm payrolls report for October, kept a lid on sentiment too.
"Stocks are registering hefty losses as the market takes risk off the table in the wake of another run of bad news from the banking sector," said Jane Foley, research director at Forex.com.
That raises fears that major economies "will only be able to manage lackluster growth going forward," Foley said.
In Europe, Britain's FTSE 100 index of leading British shares was down 106.52 points, or 2.1 per cent, at 4,997.98 while Germany's DAX fell 93.20 points, or 1.7 per cent, to 5.337,62. The CAC-40 in France was 73.40 points, or 2 per cent, lower at 3,566.06.
Most attention in Europe focused on the banks, particularly Lloyds Banking Group PLC and Royal Bank of Scotland PLC.
Royal Bank said that it was taking an additional 25 billion pounds from the government and joining the government's Asset Protection Scheme. Meanwhile, Lloyds confirmed it was looking to raise at least 21 billion pounds ($34.2 billion) through a record share issue and debt swap, instead of joining the insurance scheme.
As a result, the pair faced differing reactions in the markets. Lloyds was the top riser on the FTSE, up over 1 per cent, while Royal Bank of Scotland slid 4.5 per cent.
Results from UBS kept the banks in focus across Europe. The Swiss bank reported a third-quarter net loss of 564 million Swiss francs ($542 million) — its fourth straight quarterly loss — after 2.15 billion francs in accounting charges.
UBS shares fell more than 4 per cent on the Zurich exchange.
It wasn't just the banks causing concern in Europe. German carmaker BMW AG saw its share price slide over 7 per cent after it reported a bigger than expected 74 per cent decline in third quarter net income.
Many analysts think that the markets are at a crucial juncture and that stocks, which have rallied for most of the year, could be facing a year-end slide. Over the last couple of months, most of the dips have proved to be short-lived.
"At the moment however, it seems that traders do not have the same conviction that they have displayed previously and rallies from here are proving to be unsustainable," said David Jones, chief market strategist at IG Index.
Economic matters will be at the forefront of traders' attention this week. In particular, they will be looking to see what the U.S. Federal Reserve, the European Central Bank and the Bank of England say about the world economy when they announce their latest interest rate decisions.
Though all three banks are expected to keep their benchmark rates at historic lows, investors will be focusing on what they say about economic prospects and when extraordinary measures to boost the world economy will start to be unwound. The Bank of England is the only one that may well change current policy, with most analysts now predicting that it will increase the amount of money it pumps into the economy.
Investors remain particularly nervous about the U.S. jobs report for October, which often sets the stock market tone for a week or two.
U.S. stocks were poised to open down later after a volatile session on Monday despite an encouraging manufacturing survey. Dow futures were 80 points, or 0.8 per cent, lower at 9,655 while the broader Standard & Poor's 500 futures fell 9.3 points, or 0.9 per cent, at 1,029.80.
The earlier quarter point interest rate hike in Australia failed to inspire the same jubilation among investors as last month's. October's rate hike, the first in a major economy since the onset of the crisis, was greeted as evidence of an improving world economy. Australia's S&P/ASX 200 closed down 0.2 per cent.
Elsewhere, Hong Kong's Hang Seng led Asia's losses, falling 380.13 points, or 1.8 per cent, to 21,240.06 while South Korea's Kospi was down 0.6 per cent at 1,549.92. Japan's market was closed for a holiday.
China's Shanghai index bucked the trend, gaining 1.2 per cent to 3,114.23 with sentiment still boosted by a weekend report manufacturing expanded for an eighth straight month in October.
Benchmark crude for December delivery fell $1 $77.13 a barrel. The contract rose $1.13 to settle at $78.13 on Monday.
The dollar fell 0.3 per cent to 90.07 yen while the euro dropped 0.8 per cent to $1.4646.