By PAN PYLAS
2009-02-13 12:16 AM
The FTSE 100 index of leading British shares closed down 32.16 points, or 0.8 percent, to 4,202.10, while Germany's DAX declined 122.53 points, or 2.7 percent, to 4,407.56. The CAC-40 in France was 63.38 points, or 2.1 percent, lower at 2,964.34.
On Wall Street, the Dow Jones industrial average dropped 109.51 points, or 1.4 percent, at 7,830.02 while the broader Standard & Poor's 500 index fell 10.29 points, or 1.2 percent, to 823.45.
The losses in the U.S. came despite a 1 percent jump in U.S. retail sales in January as consumers responded to bargains, particularly in the auto sector. The rise, which concluded a six-month losing streak, was unexpected. The markets were expecting a 0.8 percent decline.
However, analysts said the surprise increase will do little to change the underlying picture, especially as unemployment is poised to carry on rising.
"Unfortunately, it is unlikely to continue," said Michael Woolfolk, an analyst at Bank of New York Mellon.
Analysts said the $789 billion stimulus package passed by Congress, which will likely be signed into law next week by President Barack Obama, will take a long time to have an effect.
Sentiment on Wall Street has been hit this week by growing pessimism about the state of the U.S. economy, especially after the bank rescue plan announced by U.S. Treasury Secretary Tim Geithner failed to encourage financial markets because of an apparent lack of detail.
Meanwhile, European markets also had to digest a raft of grim corporate news.
In Britain, drinks maker Diageo warned that its profits for the 2008-9 fiscal year would be lower than previously anticipated because of the global economic slowdown, while BT PLC, the telecommunications company, issued its fourth profit warning in the space of just six months as a result of further one-off charges.
In France, EDF, the world's biggest nuclear reactor operator, reported a 40 percent drop in net profit last year, due mainly to a provision related to changes in the regulation of power rates. And carmaker Renault SA made a loss in the second half of the year and said it expected the outlook to darken further this year as the economic crisis continues to ravage car sales.
"There are no green shoots of recovery; with profit warnings, continuing bad news on the global economy, there is a risk that equity markets will continue to lose ground," said Neil Mackinnon, chief economist at ECU Group.
In Asia, Japan's Nikkei stock average tumbled 240.58 points, or 3 percent, to 7,705.36 _ the lowest in nearly three months. The Nikkei's losses were accentuated by the fact the markets had been closed on Wednesday for a national holiday.
Meanwhile, Hong Kong's Hang Seng lost 2.3 percent to 13,228.30, while South Korea's Kospi lost 0.9 percent despite another rate cut from the country's central bank. Shanghai's main index was off 0.6 percent and Taiwan's benchmark retreated 2.4 percent. However, Australia's key stock measure gained 1.2 percent.
Oil prices fell slightly, with light, sweet crude for March delivery down $0.88 cents at $35.06 a barrel in electronic trade on the New York Mercantile Exchange. The contract shed $1.99 to settle at $35.94 a barrel on the New York Mercantile Exchange on Wednesday.
Meanwhile, the dollar fell 0.1 percent to 90.32 yen while the euro declined 0.5 percent to $1.2834.
AP Business Writer Jeremiah Marquez in Hong Kong contributed to this report.