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London - Profit-taking helped push European stock markets lower on Wednesday, with Britain's FTSE 100 index further undermined by mounting uncertainty about the future of the Labour government and Prime Minister Gordon Brown in particular.
Germany's DAX was 36.44 points, lower at 5,107.62, while France's CAC-40 fell 33.45, to 3,344.59.
The losses on Britain's FTSE 100 index of leading British shares were double those recorded in Germany and France, as investors tried to get to grips with the apparent chaos in the Labour government. The FTSE was down 83.52 points, at 4,393.50.
Hazel Blears, the communities secretary, resigned from the Cabinet, piling the pressure on Brown ahead of what are expected to be dismal European and local election results for his Labour party on Thursday.
"Political instability seems to be creeping into the UK as the Brown cabinet continues to suffer from resignations and the market is now watching whether Chancellor Alistair Darling will be able to hold on to his job after a much-anticipated government reshuffle in the coming days," said Geoffrey Yu, an analyst at UBS.
The losses on the FTSE came despite some encouraging economic news. A closely-watched survey found that Britain's services sector, which accounts for around two-thirds of the total economy, grew again in May, reinforcing hopes that the recession may soon be over.
Britain aside, analysts reckon that economic news could well be the main driver this week. The raft of news culminates in Friday's closely-watched US non-farm payrolls report for May where investors will be looking to see if the recent better than expected US economic data is being translated into more modest job losses.
Investsors readying themselves for ECB
Figures from the ADP payrolls firm on Wednesday indicated that another weak number is likely on Friday. It said 532 000 private sector jobs were shed in May, slightly less than the 545 000 recorded in April.
Ahead of the open, Wall Street futures were pointing slightly lower. Dow futures were down 26 points, at 8,688 while the broader Standard & Poor's 500 futures were 3.9 points, lower at 938.70. On Tuesday, the Dow rose 0.2%, to 8,740.87 and the S&P 500 index rose 0.2%, to 944.74.
Investors are also positioning themselves for Thursday's interest rate decisions from the European Central Bank and the Bank of England. Though they are expected to keep their benchmark rates at 1% and 0.5% respectively, investors will be interested to see what the two banks say about the economic outlook after some recent encouraging data.
Earlier, Japan's Nikkei 225 stock average rose for a sixth straight session, climbing 37.36 points, at 9,741.67. Hong Kong's Hang Seng gained 187.39, to 18,576.47 on optimism that China will rebound from its economic slowdown.
China's Shanghai Composite index rose to a 10-month high, advancing 2% to 2,778.59. Australia's index gained 1.6%, and Thailand's SET index rose 1.1%.
Markets in Taiwan, the Philippines and India fell.
Crude oil prices hovered above $68 a barrel and near seven-month highs earlier as investors sought a safe haven in commodities from a weaker US dollar and inflation. Benchmark crude for July delivery was down 60c to $67.95 a barrel in electronic trading on the New York Mercantile Exchange.
The dollar was up at ¥96 from ¥95.45 while the euro fell to $1.4206 from $1.4293 late on Tuesday in New York.
- AP
