European shares rally after global sell-off

LONDON (AFP) - Europe's main stock markets rebounded on Monday, recovering slightly from heavy losses ahead of the weekend on worries about a potential US recession that have also rattled Asian and US equities.

In late morning trade, London's FTSE 100 index of leading shares was up 0.22 percent at 6,362.60 points, Frankfurt's DAX 30 rose 0.35 percent to 7,836.74 points and in Paris the CAC 40 gained 0.47 percent to 5,472.22.

"Following the weak US non-farm payroll report on Friday which suggested the US economy might be showing more signs of faltering ... risk aversion is back in focus," said ABN Amro analyst Melinda Smith.

"There were sharp losses in US stock markets (Friday) and similar repercussions were seen in Asia-Pacific equity markets" on Monday, she added.

Europe's main stock markets had closed sharply lower on Friday after disappointing jobs data in the United States sparked concern about slowing growth and the prospect of recession in the world's biggest economy.

Fears of a US recession rattled Asian stock markets Monday with most of the region suffering heavy losses.

Tokyo ended down 1.3 percent at a fresh 17-month low. Asia's largest stock market has lost more than five percent of its value in the first two sessions of 2008 amid worries about the US economy and a surge in crude oil prices.

Shanghai bucked the trend with a gain of 0.6 percent, but elsewhere trading screens were a sea of red.

Hong Kong was down 2.6 percent in late trade as Singapore lost 2.4 percent. Seoul ended down 1.8 percent, Sydney slumped 2.3 percent and Taipei plunged 4.1 percent.

"Market players are facing a difficult time as signs are emerging that the US economy may be slipping into a recession," said Choi Seong-Lak, strategist at SK Securities in Seoul.

Investors in Asia took little comfort from a further drop in world oil prices away from the symbolic 100-dollar per barrel level, which they topped last week for the first time.

Instead they took their cue from Wall Street where the Dow Jones index slumped by almost two percent on Friday. The fall came after data showed the weakest US job creation since 2003 and unemployment at a two-year high.

"The US economy is at a crucial point. It may enter into recession in the latter half of 2008 in the wake of a poor showing in payroll numbers," said Yoshikiyo Shimamine, economist at Dai-Ichi Life Research Institute in Tokyo.

Only 18,000 new US jobs were created in December, the Labor Department reported Friday, well below the 70,000 expected by analysts.

The unemployment rate rose to 5.0 percent in December, the highest since November 2005 and worse than expected.

Investors fear that a sluggish US jobs market will curb personal income and consumer spending, weighing heavily on the overall economy, dealers said.

Markets are betting that the Federal Reserve will continue to cut interest rates this year to try to stave off a recession.

Analysts expect the Fed to trim rates at least by 25 basis points at its next meeting starting January 29, dealers said.