= GLOBAL MARKETS: European Stocks In The Red; Econ Fears Weigh

Mon. July 06, 2009; Posted: 04:27 AM

European stocks fell Monday, as economic fears weighed on sentiment in a quiet start to the week's trading.

"Continuing declines in key commodities are fuelling worries that the global economic recovery remains a distant prospect, prompting ongoing profit-taking on recent asset gains," said Collins Stewart Wealth Management.

By 0810 GMT, the pan-European Stoxx 600 index was down 1.7% at 200.7. London's FTSE 100 declined 1.2% to 4186.7, Frankfurt's DAX was 1.6% lower at 4633.9 and Paris's CAC-40 fell 1.5% to 3071.4.

"Distinct recovery has melted away, and it feels as if we've been slightly misled," added Owen Ireland, sales broker at ODL Securities.

Fundamentals were thin on the ground Monday, with little on the domestic economic or corporate calendars to offer direction in an uneventful market.

Basic resources stocks were among the key decliners. Base metal prices were lower following the drop in the price of crude which, in turn, was affected by bearish economic data last week. Even equity rating upgrades for a cluster of mining stocks by Deutsche Bank could not help lift spirits.

The crude oil futures market looked weak, continuing the negative tone after Thursday's weak U.S. payrolls release increased concern about an economic recovery by the world's largest energy user.

At 0815 GMT, the front-month August crude contract on Globex was $2.77 lower at $63.96 per barrel.

Elsewhere, Societe Generale declined 2.8% to EUR36.8 after it issued a surprise trading update. It said it expects to post only a small profit in the second quarter as losses from credit default swaps and debt write-downs weigh on an otherwise improved operating performance at its corporate and investment bank.

Meanwhile, Asian equity markets had no lead from the U.S., with Wall Street closed on Friday for the Independence Day celebrations. Asian shares were mostly lower, with some caution creeping in as the U.S. corporate earnings season drew closer.

Japan's Nikkei 225 closed down 1.4%, Australia's S&P/ASX 200 ended 1.2% lower, while Hong Kong's Hang Seng index declined 1.2%.

"Sentiment isn't great at the moment. The market may have run a bit hard in the second quarter. This is just a retracement and not unexpected," said Macquarie Private Wealth senior private client adviser Marcus Droga.

In the foreign exchanges, the yen rose against the dollar and the euro as sliding regional shares and fading optimism over the U.S. and global economic outlooks drove speculators to buy the safe-haven Japanese currency.

At 0820 GMT, the dollar stood at Y95.27, down from Y96.04 late Friday, and the euro stood at Y132.70, down from Y134.25.

As for the dollar, the G8 Summit in L'Aquila, Italy, from Wednesday to Friday could see the greenback's reserve status being discussed.

"As the G8 summit approaches we do expect rhetoric on the dollar to heat up," said Geoffrey Yu at UBS, "but we doubt that the G8 would agree to include remarks on reserve currencies... in the summit's final declaration due to potential political ramifications."

"We expect U.S. officials to concede that its major creditors have the right to raise the issue, but will also attempt to reassure investors (about) the safety of their dollar holdings," Yu added. The euro traded at $1.3925 at 0820 GMT, down from $1.3980 previously.

The safe-haven sovereign debt markets were firmer Monday, as investors moved into low-risk government debt following the weaker equity markets.

At 0820 GMT, the September bund contract stood at 121.82, 0.25 higher.

Also at 0820 GMT, spot gold stood at $924.60/oz, $6.23 lower than previously.

-By Andrea Tryphonides, Dow Jones Newswires; +44-20-7842-9281; andrea.tryphonides@dowjones.com

(END) Dow Jones Newswires

07-06-09 0427ET

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