European exchanges slide

PARIS: Share prices fell in Frankfurt and Paris Monday, dragged down by a mixed assessment from German businesses and auto sector weakness and in the absence of direction from London and Wall Street.

Markets were closed in Britain and the United States for public holidays.

Most Asian exchanges closed higher earlier in the day, shrugging off concerns prompted by an announcement from North Korea that it had carried out a nuclear test.

In Europe the Frankfurt Dax was down 1.62 percent at 4,838.88 in mid-session trade while in Paris the CAC 40 had fallen 0.58 percent to 3,209.37 points.

A key business sentiment index in Germany, the Ifo indicator, was reported to have risen to a six-month high of 84.2 in May, suggesting that Europe's top economy might be pulling out of its worst slump in over 60 years.

But tempering the optimism, and affecting trade on the Frankfurt exchange, was a sub-index revealing that an assessment by businesses of the current economic situation in Germany had fallen in May to 82.5, its lowest level ever.

"All in all, the survey results suggest that we are over the worst of this downturn," said Marco Bargel, an analyst at Postbank.

"But the renewed bad assessment of the current situation shows that the way out of this recession will be difficult and definitely not smooth."

German retail giant Arcandor plunged 20.45 percent to 1.75 euors at one point after warning over the weekend that its survival depended on government aid.

Automaker Porsche fell 6.33 percent to 42.32 euros on concerns about its financial health. Volkswagen, with whom Porsche is trying to merge, was down 1.05 percent at 221.01 euros.

The auto sector also weighed heavily on sentiment in Paris, where there was speculation that US manufacturer General Motors could declare bankruptcy this week.

Renault shares gave up 2.91 percent to reach 25.50, Peugeot slid 0.86 percent to 19.52 euros and tire maker Michelin shed 2.39 percent to reach 39.24 euros.

Among the day's gainers was pharmaceutical group Sanofi-Aventis, which rose 1.56 percent to 44.56 euros on news it had received an order worth 190 million dollars (136 million euros) from the US government for swine flu vaccine.

Japanese shares meanwhile closed higher for the first time in three sessions as gains among commodity-related shares and a weaker yen offset jitters over a nuclear test by North Korea.

The benchmark Nikkei-225 index rose 1.31 percent to 9,347.00.

Investors held their nerve following North Korea's announcement that it had carried out an underground nuclear test that was more powerful than its previous one in October 2006.

The news was seen as weighing on the yen, given Japan's geographical proximity to North Korea. That in turn gave a boost to exporters such as Sony, which advanced 1.8 percent to 2,495 yen.

South Korean shares closed just 0.20 percent lower Monday after an earlier plunge following the North's announcement.

"The market more than recovered its loss from the nuke test as investors (have) learned from past experiences that the geopolitical factor is of negligible impact," Kwak Joong-Bo of Hana Daetoo Securities told Dow Jones Newswires.

Analysts said the next focus for investors would be the US government's decision on the fate of General Motors.