* World equity markets extend falls into seventh day
* Debt crisis sends euro zone back into recession
* Middle East tensions support oil, Brent hits $111 a barrel
* Yen sinks to 6-1/2 mth low vs dollar, euro firms to
By Richard Hubbard
LONDON, Nov 15 World equity markets fell for a
seventh day on Thursday, hit by evidence that Europe's debt
crisis has stalled economic growth and by persistent concern
over the budget problems in the United States.
Stock index futures pointed to a slight recovery on Wall
Street later, though data on the jobs market, consumer price
inflation and business activity in New York and Philadelphia
could have a big impact on sentiment.
Brent crude oil jumped to $111 a barrel as fighting in the
Gaza Strip sparked worries of an escalation that could
ultimately disrupt oil supplies from the Middle East.
"The global economy faces some severe headwinds. Against
that backdrop we see short-term de-risking of portfolios," said
Abi Oladimeji, head of investment strategy at Thomas Miller
The FTSEurofirst 300 index of top European shares
was down 0.7 percent at 1,080.62 points, having fallen 1 percent
on Wednesday, but actual trading volume was quite low. London's
FTSE 100, Frankfurt's DAX and Paris's CAC-40
were down around 0.5 to 0.9 percent.
Growth in Germany, Europe's largest economy, cooled to 0.2
percent over the July-September period compared with the
previous three months, while data showed the wider 17-nation
euro zone has slipped back into recession.
Economic output in the euro area fell 0.1 percent in the
third quarter after falling 0.2 percent in the April to June
period, making it the second recession since 2009.
"The double-dip is a fact," said Martin Van Vliet, an
economist at ING Bank. "What you notice is that the recession in
southern Europe is slowly creeping to other countries."
The MSCI world equity index was down 0.2
percent at 317.92 points and has now lost over 3 percent this
month. MSCI's broadest index of Asia Pacific shares outside
Japan fell 1 percent.
World stocks are now on course for a seventh successive day
of losses, hit by the prospect of a slowdown in the giant U.S.
economy if politicians can't strike a deal to avoid the 'fiscal
cliff' - a series of spending cuts and tax rises due to take
effect early next year.
U.S. stocks fell more than 1 percent on Wednesday after
President Barack Obama reiterated his call for the wealthy to
pay higher taxes, setting the stage for a budget battle with
Republicans in Congress.
The unveiling of an older, conservative new leadership
line-up in China on Thursday also appeared to dent hopes that
the government would take bold steps to deal with slowing growth
in the world's second-biggest economy.
However, Johannes Reich, head of equity research and
strategy at Bankhaus Metzler, said the current accommodative
monetary policies from the world's major central banks should
prevent a sharp retracement in share markets.
"It is going to be bumpy ride for equities but I do not see
a major trend up or down," Reich said.
The retreat from riskier assets also weighed on commodities,
but not oil, which moved higher as Israeli warplanes bombed
targets in and around Gaza city and Palestinian militants from
Hamas fired a rocket that killed three Israelis.
Benchmark Brent crude rose $1.39 cents to $111 a
barrel, having risen more than 1 percent on Wednesday. U.S. oil
was up 16 cents to $86.49/bbl.
Bucking the gloom, Tokyo's Nikkei rose 1.9 percent as the
boost given to exporters such as Toyota Motor Corp,
Honda Motor Co and Canon Inc. from a weakening
yen outweighed global growth concerns.
The yen has fallen sharply against the dollar and the euro
since Japanese Prime Minister Yoshihiko Noda indicated he would
call a snap election for next month that the opposition Liberal
Democratic Party, which has called for aggressive monetary
easing to support growth, is expected to win.
The yen hit a 6-1/2-month low against the dollar at
81.20 yen and fell to 103.60 against the euro.
The single currency, which generally moves in line with
riskier assets, inched up 0.1 percent to $1.2760, recovering
from Tuesday's two-month low of $1.2661.
Some analysts said investors were wary of selling the euro
heavily in case policymakers surprised markets with decisive
action to tackle the euro zone debt crisis.
"They don't want to sell into it too aggressively in case
there's a policy response from the European Central Bank that
would see people get stopped out of shorts," said Geoffrey Yu,
currency strategist at UBS.
However, the single currency is seen as vulnerable to
concerns about slowing growth and uncertainty over aid for
Greece and Spain.