European stock markets fell again Monday ahead of an expected lower opening on Wall Street as the euro was back under pressure. The effective nationalization of a regional bank in Spain stoked renewed concerns about the financial health of the continent's banks in the wake of the recession and a government debt crisis.
In Europe, the FTSE 100 index of leading British was down 16.85 points, or 0.3 percent, at 5,046.08 while France's CAC-40 fell 16.86 points, or 0.5 percent, at 3,413.88. Germany's DAX was 68.65 points, or 1.2 percent, lower at 5,760.60.
On Wall Street, stocks were poised to give up some of Friday's advance — Dow futures were down 69 points, or 0.7 percent, at 10,091 while the broader Standard & Poor's 500 futures fell 9.3 points, or 0.9 percent, at 1,075.30.
Once again, Europe's debt crisis remains the main focus in the markets — despite an early advance, investors continue to fret about the ability of governments across the continent to get a handle on their debts.
The latest bout of jitters have been stoked by the weekend news that the Bank of Spain was taking over regional bank CajaSur after merger talks with another similar entity broke down.
By early afternoon London time, the euro was down 1.5 percent on the day at $1.2360 — despite the fall, Europe's single currency is still way up from the four-year low of $1.2146 recorded Wednesday in the wake of a unilateral German ban of naked short-selling that unnerved markets, who took it as a sign of an uncoordinated policy response to financial turmoil in Europe.
The rescue of CajaSur follows last week's decision by the Bank of Italy to suspend mark to market requirements on Italian bank exposure to eurozone government bonds, which fueled fears that an Italian bank may be in trouble. Suspending the requirement means the banks do not have to reflect the fallen value of the bonds on their balance sheets or earnings statements.
"The market is becoming concerned that more bad news concerning the positions of banks could be in the pipeline," said Foley.
Earlier in Asia, markets put Europe's financial difficulties on the backburner, and mostly closed higher amid mounting talk that China's monetary authorities would allow the yuan to rise in value against the dollar.
China's Shanghai Composite index jumped 3.5 percent to 2,673.42 as jitters of tighter credit policies eased amid mounting hopes for the yuan to appreciate. Most other stock markets in the region were buoyed by Beijing's apparent willingness to talk about currency reform.
China's president Hu Jintao said at the opening of talks with a U.S. delegation headed by Treasury Secretary Timothy Geithner that the country "will continue to steadily advance reform of the yuan exchange rate."
In response Geithner welcomed the fact that China's leaders have "recognized that reform of the exchange rate is an important part of their broader reform agenda."
Most analysts think it's crucial that the yuan is allowed to rise against the dollar if the world economy is to grow in a more balanced manner in the months and years ahead.
For many years the Chinese authorities have kept their currency artificially low against the dollar, partly as a means of boosting their exports to the United States. As a result, China has built up a massive trade surplus with the U.S.
"Positive signals coming out of Geithner's meeting in Beijing will add to risk appetite as it reduces the risk of a trade war," said Hans Redeker, global head of foreign exchange strategy at BNP Paribas.
Elsewhere in Asia, Australia's S&P/ASX 200 added 2.1 percent to 4,395.40 while Hong Kong's Hang Seng gained 0.6 percent to 19,663.66. Stock markets in South Korea, India, Singapore and Indonesia all gained.
However, Japan's Nikkei 225 stock average dropped 26.14 points, or 0.3 percent, to 9,758.40 while Thailand's benchmark index fell 2.3 percent with investors cautious after the worst political violence in the Thai capital in decades last week.
Oil prices continued to hover around the $70 a barrel mark — benchmark crude for July delivery was up 15 cents to $69.89 a barrel in electronic trading on the New York Mercantile Exchange.
Associated Press Writer Alex Kennedy in Singapore contributed to this report.