LONDON — World stock markets were mostly lower Tuesday on renewed fears about the U.S. economy after a number of high-profile U.S. companies warned of trouble ahead.
One of the world's biggest losers was Argentina, where stocks plummeted 11 percent as word spread that President Cristina Fernandez was nationalizing nearly $30 billion in private pension funds in response to the global financial crisis.
Markets were mixed in Asia but European markets _ with the exception of France _ were pulled lower by weakness on Wall Street as investors come to grips with prospects of dwindling corporate profits in the fourth quarter and 2009.
The Dow Jones industrial ended down 231.77 points, or 2.5 percent, at 9,033.66.
The FTSE 100 index of leading British shares closing down 52.94 points, or 1.2 percent, at 4,229.73. Germany's DAX shed 50.60 points, or 1.1 percent, at 4,784.41.
France's CAC-40 index of leading shares remained in positive territory, buoyed by the French government's decision to inject 10.5 billion euros ($14 billion) into the country's six largest banks by year-end to help counter the effects of the financial crisis.
Though off its session peak, the CAC closed 26.89 points higher, or 0.8 percent, at 3,475.40, with banks in demand. BNP Paribas SA was up 6.9 percent, Societe Generale SA 10.2 percent and Credit Agricole SA 11.3 percent.
The latest concerns about the state of the U.S. economy emerged when companies like chemical manufacturer DuPont Co., Caterpillar Inc., the world's largest maker of construction and mining equipment and defense contractor Lockheed Martin downplayed their prospects.
Dupont reported sharply lower third-quarter earnings and trimmed its full-year forecast, while Caterpillar noted "recessionary conditions" in North America and forecast flat sales for 2009. Lockhead Martin, which makes F-35 fighter jets, reduced its guidance for next year too.
"The lackluster performance of the U.S. equity market simply goes to show that investors concerns have shifted from a meltdown in the financial sector to the rapid deterioration in the real economy," said John Higgins, senior markets economist at Capital Economics in London.
Despite Tuesday's modest declines, stock markets are showing a bit more resilience, mainly due to the fall in interbank lending rates, which should presage more stable conditions across all the financial markets.
Figures released Tuesday show that lending rates between banks in the U.S. and Europe have dropped to the lowest levels in over a month. The rate on three-month loans in dollars slumped 0.23 percentage points to 3.83 percent. The so-called European Interbank Offered Rate for three-month euro-denominated loans fell 0.03 percentage points to 4.968 percent. That is the first time the euro rate has dipped below 5.00 percent since Sept. 18, when it shot higher after Lehman Brothers collapsed.
Abnormally high interbank lending rates have been the catalyst for the crisis in the financial markets over recent weeks, raising fears they would choke off credit to businesses and individuals.
With Libor rates declining, the focus of attention has shifted from the banking crisis to economic fundamentals around the world. In Britain, for example, figures earlier showed gloom in the manufacturing sector at its lowest level since 1980. The Confederation of British Industry revealed that its quarterly business optimism balance slumped from minus 40 in June to minus 60.
As a result, there is growing talk that policymakers in Britain will have to act fast to support the real economy. The government has spoken of further loosening the purse strings, while the Bank of England may be forced to cut interest rates aggressively.
Bank of England Governor Mervyn King said Tuesday it is likely that Britain is entering a recession.
"We see policy rates being lowered to 2.50 percent (from the current 4.50 percent) by the middle of next year, with the chances of another 0.50 percent move at the November meeting to coincide with the Bank's forecast revisions rising by the day," said George Buckley, chief UK economist at Deutsche Bank.
The Bank of England and other central banks are expected to follow the Bank of Canada's lead, which earlier Tuesday cut its key interest rate by a quarter-point to help ward off the effects of a U.S.-led recession.
In Latin America, the Merval index in Buenos Aires closed down 129 points at 1,047 after President Cristina Fernandez said her government would assume control of pension funds. Government critics said the move is a ploy to prop up a shaky government expected to be hurt by lower tax revenues from sales of Argentine export crops such as soy and beef.
In neighboring Brazil, the benchmark Ibovespa index fell 1 percent to 39,043 and the nation's currency sank against the U.S. dollar.
The real dropped to 2.2 per dollar from 2.1 a day earlier even though the central bank again auctioned off an undisclosed amount of dollars from its more than $200 billion in reserves. Mexico's central bank also moved to prevent its currency from dropping, auctioning off $400 million at about 13 pesos to the dollar.
Mexico's IPC stock index fell 2.8 percent to 20,203, Colombia's IGBC dropped 0.4 percent at 7,658 and Chile's IPSA slipped 0.2 percent to 2,542.
In Asia earlier, Japan's Nikkei rose 300.66 points, or 3.34 percent, to close at 9,306.25, marking the third consecutive day of gains.
While shares in most other countries moved higher, several key stock measures sold off early gains to close in the red. Hong Kong's Hang Seng Index lost 1.84 percent, Shanghai's benchmark fell 0.8 percent and South Korea's index shed about 1 percent.
Hong Kong's benchmark was dragged down after conglomerate Citic Pacific Ltd. warned that it could faces losses of more than HK$15.5 billion (nearly $2 billion) after a top executive made unauthorized bets against the U.S. dollar.
In Australia, the main index gained 3.9 percent after the country's central bank chief said he believed coordinated global action to tackle the financial crisis had helped to avert a worldwide catastrophe. Resource giant Rio Tinto helped lead the way, soaring more than 12 percent.
Fears about the state of the world economy pushed crude oil prices below $71.00 a barrel Tuesday despite expectations that OPEC will try to halt a three-month slide in prices by cutting production quotas at least 1 million barrels a day. Light, sweet crude for November delivery fell $3.36 to settle at $70.89 on the New York Mercantile Exchange.
The 15-nation euro traded at $1.3133 late in the afternoon in New York on Tuesday, down from $1.3323. Earlier, the common currency bottomed at $1.3078, its lowest point since March 2007.
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AP Business Writers Jeremiah Marquez in Hong Kong, Carlo Piovano in London and Alan Clendenning in Sao Paulo, Brazil contributed to this report.