LONDON - World stock markets mostly fell Thursday after the US Federal Reserve struck a note of caution in its latest assessment of the world's biggest economy, indicating Europe's debt crisis poses a risk to the recovery. The central bank's statement, which accompanied a decision to leave interest rates at a record low, added to unease after weak housing figures suggested the US economic recovery is uneven and vulnerable to turmoil in the markets. The Fed said that "financial conditions have become less supportive of economic growth." It cited what it called "developments abroad" but didn't mention by name debt-laden Europe, where shaky government finances have threatened to nip the continent's recovery from recession in the bud. After mixed trading in Asia, European stocks fell on the open. Britain's FTSE 100 was down 1.2 per cent at 5,117.68 and Germany's DAX was 1.0 percent lower at 6,141.10. France's CAC-40 shed 1.2 percent to 3,596.86. Wall Street was also expected to fall later ��" Dow futures were down 0.6 per cent at 10,173 while Standard & Poor's 500 futures were 0.7 per cent lower at 1,079.30. "The (Fed) statement was unequivocally more dovish, reflecting both the impact of the European sovereign debt crisis on financial markets and the weaker tone of the incoming economic data," said Paul Ashworth, economist at Capital Economics. Stock markets had been hit earlier this week by poor housing sales figures from the US Because the American property market was the original epicenter of the global financial crisis, news that it is not healing as quickly as hoped undermined investors' confidence. Eyes will turn later to US data on durable goods orders, which are expected to have fallen during May, and to tomorrow's start to the G-20 summit of leading nations in Canada. World leaders are expected to discuss economic policy, specifically how soon stimulus should be withdrawn and how quickly deficits should be tackled. While Europe 'scarred by the near default of Greece ' is focusing on painful spending cuts to the detriment of growth, the US is pushing for a more cautious approach that will not risk derailing the global recovery. Discussions will start Friday and last into the weekend. In Asia, economic news on Thursday was relatively more upbeat ��" with Japan reporting continued growth in exports for May, driven by demand from within the region ��" but couldn't stop most markets reversing course after early gains. "Investors are still paying close attention to the uncertainty in Europe, because that might hurt China's exports," said Peng Yunliang, an analyst for Shanghai Securities. Japan's benchmark Nikkei 225 stock index edged up 0.1 percent to 9,928.34 after exports rose for a sixth straight month as brisk global demand for cars and high-tech products helped shore up a recovery in the world's second-largest economy. South Korea's Kospi gained 0.8 percent to 1,739.87. Australia's S&P/ASX 200 retreated 0.1 percent to 4,479.70 amid news Australian Prime Minister Kevin Rudd had been dumped as leader by the ruling party and replaced with his deputy. Elsewhere, Hong Kong's Hang Seng fell 0.6 per cent to 20,733.49 and the Shanghai Composite Index gave up 0.1 per cent to 2,566.75. Stocks in India, Singapore, Malaysia, Thailand, the Philippines and New Zealand all fell. In New York overnight, the Dow Jones industrial average climbed just 0.1 per cent to 10,298.44 Wednesday. In currencies, the dollar fell to 89.53 yen from 89.93 in New York late Wednesday. The euro slid to $1.2278 from $1.2316. Benchmark crude for August delivery lost 54 cents to $75.81 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell $1.50 to settle at $76.35 on Wednesday.
