Oil Prices Fall, World Stocks Tumble Over China

Chinese shares led world markets lower today amid mounting concerns Beijing will  raise interest rates to cool its overheating economy.

Investors also found scant cheer from a meeting of global leaders in South Korea  that did little to defuse currency and trade tensions and from a report that  European economic growth slowed in the third quarter.

In morning European trading, France’s CAC-40 fell 1.2 percent to 3,819.70 and  Germany’s DAX dropped 0.2 percent to 6,710.79. Britain’s FTSE 100 declined 0.4  percent to 5,791.79.

Oil prices tumbled below $86 after big gains the previous two days and Wall Street  was set to slide. Dow futures were off 95 points, or 0.8 percent, at 11,147. Broader  S&P futures shed 8.7, or 0.7 percent, to 1,202.40.

China’s Shanghai Composite index dived 5.2 percent to 3,310.58 amid expectations of  more government measures to tighten credit and slow economic growth after inflation  hit a 25-month high in October. The Shenzhen Composite Index for China’s smaller  second exchange slumped 6.1 percent.

“There are some rumors there might be another interest rate hike this weekend,” said  Linus Yip, a strategist for First Shanghai Securities in Hong Kong. The Chinese  sell-off dragged down prices elsewhere in Asia, Yip said.

Markets had been hoping for good news as leaders from the Group of 20 major advanced  and developing nations met at a summit in Seoul to resolve a U.S.-China currency  dispute that threatens to escalate into a global trade war.

But the leaders refused to endorse a U.S. push to get China to let its currency  rise.

The crux of the dispute is Washington’s allegations that Beijing is artificially  keeping its currency, the yuan, weak to gain a trade advantage. But the U.S.  position has been undermined by its own recent policy of printing money to boost a  sluggish economy, which is expected to weaken the dollar.

The G-20 meeting has been overshadowed by mounting fears that Ireland — one of  Europe’s most financially troubled countries — would not be able to cut public  spending and may have to resort to a bailout.

Investors fear that the worries could spread to other European countries with weak  economies.

“Whether or not the G-20 has taken a key step toward rectifying global imbalances  has in any case been lost by the financial markets focus on the continued escalating  sovereign debt turmoil in Ireland and Portugal with concerns that contagion could  drag Spain into trouble as well,” said Derek Halpenny, currency strategist at Bank  of Tokyo-Mitsubishi UFJ.

Flagging European growth figures also dragged down markets. Third-quarter growth in  the 16-country euro zone slowed to 0.4 percent in the July to September period from  1 percent in the previous quarter, largely because of lower growth in Germany,  Europe’s biggest economy, and an unexpected fall in industrial output in the  Netherlands.

Japan’s benchmark Nikkei 225 stock index ended down 136.65 points, or 1.4 percent,  to 9,724.81 and Australia’s S&P/ASX 200 shed 0.8 percent to 4,692.70.

Hong Kong’s Hang Seng fell 1.7 percent to 24,270.26 and South Korea’s Kospi  retreated 0.1 percent to 1,913.12. Markets in India, Singapore and Taiwan were also  lower.

In the U.S. yesterday, the Dow Jones industrial average shed 73.94 points, or 0.7  percent, to close at 11,283.10.

In currencies, the dollar fell to 82.15 yen from 82.32 yen late yesterday in New  York. The euro edged up to $1.367 from $1.3648.

Benchmark crude for December delivery slid $1.55 to $87.26 a barrel in electronic  trading on the New York Mercantile Exchange. The contract settled unchanged at  $87.81 yesterday.