World stock markets lost steam Tuesday after Germany's economic growth came to a near-standstill in the second quarter, adding to fears that the global economy is slowing down.
Oil prices hovered near $87 a barrel in Asia. The dollar was higher against the yen and the euro.
European shares tumbled in early trading after data showed that Germany, Europe's biggest economy, grew just 0.1 per cent in the second quarter, sharply below expectations. Britain's FTSE 100 fell 1.4 per cent to 5,275.73. Germany's DAX dropped 2.6 per cent to 5,866.26 and France's CAC-40 lost 2.2 per cent to 3,168.14.
Wall Street was also headed for a lower opening, with Dow Jones industrial futures down one per cent to 11,293 and S&P 500 futures down 1.3 per cent at 1,182.30.
The U.S. economy also is growing at a far slower rate than previously thought. The Federal Reserve last week decided to keep interest rates extremely low for two more years, saying it expected the economy to remain weak for that period.
Meanwhile, figures Monday showed Japan's economy contracted further in the second quarter in the wake of March's devastating earthquake and tsunami.
Earlier in the day, Asian shares traded higher on the heels of a round of corporate deals in the U.S. that lifted Wall Street higher.
Japan's Nikkei 225 index rose 0.2 per cent to close at 9,107.43.
South Korea's Kospi jumped 4.8 per cent to 1,879.87 following a public holiday, with steelmaker POSCO soaring 7.4 per cent.
Benchmarks in the Philippines, Malaysia and New Zealand were also higher.
Hong Kong's Hang Seng lost 0.2 per cent to 20,212.08. Australia's S&P/ASX 200 slipped 0.8 per cent to 4,247.30 as Westpac Banking Corp. tumbled 4.4 per cent and dragged down other financials.
Australian flagship carrier Qantas Airways dipped 0.3 per cent after it announced plans to cut up to 1,000 jobs as part of a major shake-up of its international business.
'There are still a lot of uncertainties that are keeping investors on the sidelines.'—Kwong Man Bun, COO, KGI Securities in Hong Kong
Mainland Chinese shares snapped a five-session winning streak as investors cashed in on recent gains.
The Shanghai Composite Index lost 0.7 per cent to 2,608.17 and the Shenzhen Composite Index lost 0.7 per cent to 1,166.84.
"The market might be just correcting after investors think things over, but the loss today after yesterday's gain means there is no strong momentum of support," said Yang Yining, an analyst at Capital-edge Investment & Management Co. in Shanghai.
Asian technology shares got a boost from news Monday that Google is buying wireless phone maker Motorola Mobility for $12.5 billion US in cash, the largest deal ever for Google. Japanese memory chip maker Elpida Memory Inc. rose 5.1 per cent. Samsung Electronics gained 6.1 per cent and Hynix Semiconductor was up 3.8 per cent.
The Google announcement, along with several other acquisitions announced in the U.S. the same day, helped restore confidence in risky assets because such deals are interpreted as a sign that companies are more confident about the future.
But analysts were cautious about reading too much into Tuesday's stock gains.
"It's still too early to say whether this is a reversal of the previous downward trend. There are still a lot of uncertainties that are keeping investors on the sidelines," said Kwong Man Bun, chief operating officer at KGI Securities in Hong Kong.
The Dow rose or fell by at least 400 points on four straight days last week for the first time ever amid fears the U.S. economy could slide back into recession.
Higher oil and gold prices also helped the Toronto Stock Exchange post a strong advance Monday, buildng on gains made during last week's wild swings on global markets.
The S&P/TSX composite index closed up 141.41 points, or 1.13 per cent, at 12,683.61. The heavily-weighted energy sector rose 1.5 per cent on the strength of higher oil prices. September oil gained $2.50 to close at $87.88 US a barrel on the New York Mercantile Exchange.
S&P/TSX composite index 1-month chart The TSX financial index was 1.0 per cent higher.
Golds advanced as bullion futures surged $15.20 US an ounce to $1,755.50 an ounce.
But more swings could come this week.
Leaders of France and Germany meet Tuesday to discuss Europe's debt problems. Spain and other countries have borrowed so much that they may need help to repay their bills.
Japan's Nikkei 225 index rose 0.2 per cent to 9,101.53. Hong Kong's Hang Seng gained 0.4 per cent to 20,343.39, as a visit by Chinese Vice Premier Li Keqiang raised hopes for an announcement from Beijing that would be favourable to the territory.
South Korea's Kospi jumped 4.5 per cent to 1,873.22 following a public holiday, with steelmaker POSCO soaring 7.7 per cent.
Benchmarks in Singapore, Indonesia and Malaysia were also higher.
Australia's S&P/ASX 200 slipped 0.7 per cent to 4,253.80 as Westpac Banking Corp. tumbled 4.4 per cent and dragged down other financials. Australian flagship carrier Qantas Airways rose 1.4 per cent after it announced plans to cut up to 1,000 jobs as part of a major shakeup of its international business.
Mainland Chinese shares and Taiwan's TAIEX were also lower.
The Dow Jones Industrial rose for the third day in a row Monday, closing up 1.9 per cent at 11,482.90. The Standard & Poor's 500 index rose 2.2 per cent to 1,204.49.
Benchmark oil for September delivery was down 53 cents to $87.32 a barrel in electronic trading on the New York Mercantile Exchange.
Crude surged $2.50 to settle at $87.88 on Thursday.
In London, Brent crude for October delivery was down 46 cents to $109.38 per barrel on the ICE Futures exchange.
The euro dropped to $1.4425 from $1.4451 in late trading in New York. The U.S. dollar strengthened to 76.83 yen from 76.78 yen, while the Canadian dollar added 1.11 cents to 102.05 cents US.
With files from CBC News Back to accessibility links
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