LONDON - EUROPE'S main stock markets fell Wednesday despite sharp gains across Asia as the White House and Congress looked to an agreement in principle on a rescue for the beleaguered US automotive industry.

Wall Street shares fell on Tuesday as a series of bleak earnings forecasts from US companies reeling from recession prompted investors to lock in gains after two days of strong rallies, traders said.

Following the New York close, the White House indicated an agreement in principle was in place with Congressional leaders on a US$15-billion (S$22 billion) auto industry rescue package but stressed negotiations were not yet over.

'There is a possibility that Congress will vote as early as today (Wednesday) on the 15 billion dollar plan to keep automakers afloat while forcing them to restructure,' said Barclays Capital analyst David Woo.

'This is likely to remain the dominant issue for US equity markets over the next few days.'

Wall Street was to reopen at 1430 GMT (10.30pm Singapore time) on Wednesday.

Meanwhile in Europe, London's stock market was down 0.85 per cent nearing midday. Frankfurt lost 0.33 per cent, Paris dropped 0.54 per cent and Rome shed 0.37 per cent.

Italy's economy shrank 0.5 per cent in the third quarter, putting the country in recession, official data showed Wednesday, confirming figures released in mid-November.

Gross domestic product in the eurozone's third largest economy after Germany and France contracted 0.4 per cent in the second quarter, with recession counted as two successive quarters of falling output.

In Asia, Tokyo closed up 3.15 per cent on Wednesday, Hong Kong soared 5.6 per cent, Seoul jumped 3.6 per cent, Taiwan added 4.16 per cent and Sydney put on 1.0 per cent.

Anglo-Australian mining giant Rio Tinto on Wednesday said it would slash thousands of jobs globally to cut its debt by 10 billion dollars as it battles falling commodity prices and a worldwide economic slowdown.

Investors meanwhile reacted coolly to Sony Corp's plans to slash about 16,000 jobs and shut plants to cope with the financial crisis, as analysts warned the revamp may not be radical enough. Sony shares ended up 1.1 per cent.

In the United States, White House spokeswoman Dana Perino said US authorities would continue to work towards finalising legislation aimed at helping to rescue the American car industry.

'A great deal of progress has been made,' she said of the legislation to shore up the ailing Big Three - Chrysler, Ford and General Motors.

'Market sentiment improved following reports that Congressional Democrats had reached an agreement with the White House over the outlines of the plan,' said Lee Hardman, an economist at The Bank of Tokyo-Mitsubishi UFJ in London.

Investors however remained on edge as the World Bank offered a grim forecast for global growth next year and new data from Japan confirmed that the world's second-largest economy was rapidly worsening.

The World Bank forecast slowing growth of just 0.9 per cent for the global economy and said global trade volume would fall 2.1 per cent as the financial crisis takes its toll on rich and poor nations alike.

'The outlook for the world economy has deteriorated significantly and the global recession will be broader and deeper than previously anticipated,' the World Bank said. -- AFP

KUALA LUMPUR
Malaysian shares closed 2.3 per cent higher on Wednesday as investors bought cheap value stocks, particularly heavyweights and lower liners, dealers said.

The Kuala Lumpur Composite Index rose 19.49 points to end the day at 854.66.

SHANGHAI
Chinese shares closed up 2.03 per cent on Wednesday as weaker-than-expected November factory gate price data fanned hopes that Beijing would introduce new measures to boost the economy, dealers said.

The benchmark Shanghai Composite Index, which covers A and B shares, closed up 41.38 points at 2,079.12 on turnover of 93.1 billion yuan (S$20 billion).

HONG KONG
Hong Kong share prices closed 5.6 per cent higher on Wednesday, as China stocks were boosted by hopes of new economic stimulus measures by Beijing, dealers said.

The benchmark Hang Seng Index closed up 824.52 points to 15,577.74, just off its intraday high of 5,578.96. Turnover was HK$61.85 billion (S$11.9 billion).

TOKYO
Japan's Nikkei stock index ended up 3.15 per cent on Wednesday as investors went bargain hunting despite overnight losses on Wall Street.

The Nikkei rose 264.37 points to 8,660.24. The broader Topix index of all first section issues climbed 16.61 points, or 2.03 percent, to 834.55. -- AFP, BERNAMA