World Markets Steady Amid More Grim News

European stock markets were little changed Thursday while Wall Street rallied dramatically following hefty losses in the first part of the week. Asian shares closely sharply lower.

The Dow Jones index of leading U.S. shares gained more than 500 points in up and down trade in New York as traders appeared to take in stride a government report showing a larger-than-expected jump in unemployment claims. The Dow closed near the 8,800 mark after dipping below 8,000 points earlier in the day.

But Art Cashin, the director of floor trading operations at the New York Stock Exchange for UBS Financial Services, told CBS' The Early Show that that financial jitters won't go away soon.

"The trouble is still in both housing and in the financial system and trouble with the financial problem is it's a little like religion. It's based on faith and belief," Cashin said. "Right now, people have had their faith a little shattered and it's tough to get it repaired."

The Labor Department said the number of newly laid-off individuals seeking unemployment benefits has jumped to a level not seen since just after the Sept. 11, 2001, terrorist attacks.

The FTSE 100 index of leading British shares closed down 12.81 points, or 0.3 percent, at 4,169.21 but Germany's DAX was 28.72 points higher at 4,649.52 despite confirmation that Europe's biggest economy is officially in recession.

The CAC-40 in France was up 35.5 points, or 1.1 percent, at 3,269.46.

Earlier Japan's benchmark Nikkei 225 stock average fell 456.87 points, or 5.3 percent, to 8,238.64 and Hong Kong's Hang Seng index dived 5.2 percent to 13,221.35, following 410 point losses for the Dow on Wednesday.

With corporate news consistently coming in worse than anticipated, investors remain wary of piling into stocks too heavily - though, lured by potential bargains, some investors are dipping their toes cautiously back in.

This week's selling pressure has been stoked by a run of bad U.S. corporate news over the last week from the likes of General Motors Corp., electronics retailer Circuit City Stores Inc. and department store chain Macy's Inc.

In addition, investors reacted nervously to the announcement from U.S. Treasury Secretary Henry Paulson that the original $700 billion financial rescue package won't be used to purchase troubled assets from banks. The Treasury will instead rely on buying stakes in banks and providing more direct help to consumer debt markets.

"In an environment where regaining some poise in financial markets is paramount, a sense that the goalposts have been moved was not especially comforting," said Daragh Maher, an analyst at Calyon.

It's not just the U.S. economy that's prompting concerns around the world.

In its latest economic forecasts, the Paris-based Organization for Economic Cooperation and Development said gross domestic product was likely to fall by 0.3 percent in 2009 for its 30 member countries, representing democracies with market economies. It said the U.S. economy would contract by 0.9 percent, Japan's by 0.1 percent and the euro area by 0.5 percent.

Germany officially sank into recession earlier as government figures showed Europe's biggest economy contracting for the second quarter in a row during the third quarter.

Elsewhere, Australia's benchmark index slid 5.9 percent to a four-year closing low of 3,697.3 as banks tumbled and lower commodity prices hit miners.

The Shanghai Composite Index bucked the regional trend, jumping 3.7 percent to 1,927.61 as the Chinese government's $586 billion economic stimulus package announced Sunday continued to underpin sentiment.

Stephen Roach, chairman of Morgan Stanley Asia, said China's stock market, where the key index has fallen by about two-thirds since its peak last October, may rebound next year if the country can maintain a high growth rate.

Sony Corp. plunged 8.7 percent, Nintendo Co. was off 6.9 percent and Panasonic Corp. retreated 7.4 percent.

South Korea's main Kospi index fell 3.2 percent to close at 1,088.44 after earlier falling as much as 7.4 percent. So far this year, the index has declined 42.6 percent.

Oil prices were unchanged on the day, with light, sweet crude for December at $56.16 a barrel.

The euro was 0.1 percent higher at lower $1.2516, while the dollar was 1.0 percent higher at 95.95 yen.