European stocks drop on grim economic outlook

Europe's main stock markets fell Tuesday as London traders returned to their desks and digested the bleak global economic outlook amid jitters over North Korea's nuclear test.

The British capital's FTSE 100 index of leading shares shed 0.72 percent to 4,333.72 points in late morning trade on Tuesday. The market was closed Monday for a public holiday.

Frankfurt's DAX 30 reversed 1.44 percent to 4,847.39 points and in Paris the CAC 40 lost 1.46 percent to 3,188.85. The DJ Euro Stoxx 50 index of leading eurozone shares was down 1.34 percent to 2,407.53 points. The European single currency stood at 1.3887 dollars. Frankfurt was dented by confirmation that the German economy the biggest in the eurozone was mired in its deepest recession since World War II.

German Gross Domestic Product (GDP) shrank by 3.8 percent in the first three months of the year compared to the last three months of 2008 the Destatis statistics office said, confirming preliminary data. The contraction the fourth in a row was due mainly to a plunge in exports of nearly 10 percent and was the worst decline in modern German history.

"As we move on towards the end of May, the pressures remain tipped on the downside as the fundamentals still point towards economies in distress," warned CMC Markets dealer Matt Buckland in London.

He added: "The fact remains that the outlook in the medium term is still a difficult one."

Both the French and German stock markets were little changed in thin trading on Monday, while Wall Street was also shut for a public holiday. In Asia on Tuesday, Tokyo's benchmark Nikkei-225 index fell 0.39 percent to 9,310.81 points, and Hong Kong's key Hang Seng Index closed down 0.76 percent.

Tokyo shares slid as a stronger yen weighed on exporters and investors waited for fresh leads from Wall Street when it reopens after a holiday weekend.

AFP