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World stocks slide amid caution, China off 2.6%

(Agencies)
Updated: 2009-08-25 17:19

World stocks dropped Tuesday, with China's main index sinking 2.6 percent, as investors tread cautiously after a series of gains and looked for more signs of economic recovery.

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The selling came after Asia advanced for three straight days and showed just how volatile the markets have become as investors try to determine if this year's rally has more momentum given the world economy's fragile state. Europe followed Asia lower while crude oil prices slipped below $74 a barrel and the dollar fell against the yen.

Shanghai shares retreated as investors digested comments from Premier Wen Jiabao, the country's top economic official, that China faced new problems and Beijing will keep up its stimulus measures because the recovery lacked a solid foundation.

Analysts said volumes were thin and trade volatile, signs of uncertainty about the market's near-term path.

"The sentiment is changing constantly right now because many investors are still worried if the liquidity and fundamentals still support these prices," said Linus Yip, a strategist at First Shanghai Securities in Hong Kong. "There's a lack of confidence and direction."

In early European trade, benchmarks in Germany, France and Britain were each down about 0.5 percent.

Japan's Nikkei 225 stock average lost 83.69 points, or 0.8 percent, to 10,497.36.

The Shanghai Composite Index slid as much as 5 percent at one point before paring losses. It closed down 77.63, or 2.6 percent, at 2,915.80, though the decline didn't sending regional markets tumbling like they did last week. Hong Kong's Hang Seng was off 0.5 percent at 20,435.24.

South Korea's Kospi lost 0.7 percent, and India's Sensex was up 0.3 percent.

Trade was lackluster overnight in the US.

The Dow Jones index rose 3.32, or less than 0.1 percent, to 9,509.28. The Standard & Poor's 500 index fell 0.56, or 0.1 percent, to 1,025.57, while the Nasdaq composite index fell 2.92, or 0.1 percent, to 2,017.98.

Crude oil prices fell in Asia trade, with the benchmark crude for October delivery down 45 cents at $73.92. The contract gained 48 cents overnight.

The dollar weakened to 94.30 yen from 94.48 yen. The euro fell to $1.4278 from $1.4297.