European stocks hold line despite Asian slump

European markets held steady on Monday despite a slump in Asia, after a breathtaking surge in oil prices and shock jump in US unemployment sent Wall Street spinning and fanned fears of a US recession.

In Europe, stocks stood firm in the face of a wave of worry in Asia.

The London stock market gained 0.42 percent and French shares added a marginal 0.01 percent, while the German market slipped 0.10 percent.

In London, Hargreaves Lansdown analyst Richard Hunter said: "The initial reaction has been to ignore what happened on Wall Street on Friday."

He said: "On the back of the oil price, the energy shares are looking quite strong, and the mining stocks are also looking strong.

"Adding those two sectors you are looking at about a third of the FTSE 100 by market consideration, so clearly they are leading the way in terms of the FTSE's resilience."

Japanese shares slid two percent after a dizzying three-percent plunge in the US on Friday, when oil prices rocketed the most ever in a single day to close nearly 11 dollars up at record levels around 139 dollars per barrel.

India had slumped by just over three percent by noon on Monday, Taiwan closed down 1.8 percent and South Korea ended more than one percent in the red, while Singapore was trading more than two percent lower.

Oil prices nudged lower but were within grasp of record levels after hitting a historic peak of 139.12 dollars per barrel before the weekend.

"Asian markets are certainly in for a heavy pounding over the next few weeks," Shanghai-based independent economist Andy Xie told AFP.

Investors were also coming to terms with Friday's half-point jump in US unemployment to 5.5 percent for May, which stoked fears of a recession in the world's biggest economy.

"A lot of people were hopeful that the US could avoid recession. What happened Friday dashed those hopes, which were pretty far-fetched, since a huge credit bubble has just burst," Xie said.

Investors worry that sky-high crude oil costs will bleed money from consumers, squeeze business profits and force central banks to raise borrowing costs in a bid to tame inflation, which has taken off in many countries.

That could hit economic growth even as the world economy struggles after the default crisis among subprime -- or riskier -- US mortgages, which has led to a global credit crunch and threatens losses approaching one trillion dollars.

"The Japanese economy will grow at a slower pace than expected," said Hideo Shiozumi, the founder of Shiozumi Asset Management in Tokyo. "The upside potential in the Japanese market is limited, but so is the downside."

In New Zealand, leading stocks closed down 1.45 percent, Indonesia was around one percent lower and Malaysia fell 1.6 percent.

Indonesia and Malaysia are among a batch of Asian nations that has sharply raised fuel prices recently as multi-billion-dollar government energy subsidies become unaffordable across the region.

The pressure from the soaring cost of black gold has led to mounting calls for quick action to tame sky-high oil prices.

On Sunday, eleven nations that guzzle nearly two-thirds of the world's energy called at a G8 meeting for an urgent hike in global oil production as host Japan warned the world could plunge into recession.

Experts worry that rising inflation has become a key problem in Asia, which is also battling soaring food prices. They fear that predictions of robust regional economic growth might have to be revised if the problem worsens.

There are also lingering concerns that Asia remains export-dependent and could suffer as the US economic slowdown curbs international shipments, including from China.

The Chinese market was closed on Monday for a holiday, along with Hong Kong, Australia and the Philippines. Investors were anxious about how those markets would perform when they re-open Tuesday.