Stocks lower after dismal US manufacturing data

World stock markets moved lower Monday after further dismal U.S. economic data reinforced concerns about the world's largest economy.

The Dow Jones index of leading U.S. shares was down 6.14 points, or 0.1 percent, at 9,318.87, having been up 60 points at the open.

The FTSE 100 index of leading British shares was 2.38 points, or 0.1 percent, lower at 4,374.96, while France's CAC-40 was down 3.07 points, or 0.1 percent, at 3,484.00. Germany's DAX was also 3.07 points, or 0.1 percent, lower at 4,980.95. Stocks shed their earlier gains after the Institute for Supply Management, a trade group, reported that its index of manufacturing activity fell to 38.9 in October from 43.5 in September. The reading was below expectations of a more modest decline to 41.5 and is the worst outcome since September 1982.

All three European indexes had been higher before the ISM survey.

"Overall, terrible news that confirms our fears about where the economy is headed: down," said Paul Ashworth, senior U.S. economist at Capital Economics.

Trading though remains relatively light as markets await the outcome of Tuesday's U.S. presidential election, even though polls show Democratic Senator Barack Obama leading Senator John McCain, a Republican.

Howard Wheeldon, senior strategist at BGC Partners, said there's usually a "lull in proceedings in the 48 hours" preceding U.S. elections.

Once the presidential results are in, the markets will have further U.S. economic data to digest this week, most notably Friday's October jobs report and interest rate decisions from the European Central Bank and the Bank of England. Both banks are expected to reduce their benchmark rates by a half-percentage point to 3.25 percent and 4.00 percent respectively but there is rising speculation that the Bank of England may decide to cut by a full percentage point.

"Rate cuts this week should help to support the recent improvement in risk taking," said Divyang Shah, chief strategist at the Commonwealth Bank of Australia.

Earlier, Asian stocks advanced overnight, though Japan was closed for a public holiday.

Hong Kong's blue-chip Hang Seng Index climbed 375.70, or 2.7 percent, to 14,344.37 but closed well off its session highs, while South Korea's main stock market added 1.4 percent after the government unveiled nearly $11 billion in new spending measures to prevent the economy from sliding into recession.

In Australia, the S&P/ASX 200 closed up more than 5 percent _ its best performance in almost two weeks _ despite troubling evidence of slowing manufacturing and retail sales, as traders anticipated a further interest rate cut from the country's central bank on Tuesday.

India's main stock index rose 3.5 percent after a central bank decision over the weekend to cut the nation's key interest rate and release $8.1 billion into its financial system.

Shanghai's benchmark, though, erased early gains to trade in negative territory amid reports suggesting Chinese manufacturing, the engine behind the country's phenomenal growth, was contracting. The index closed down 0.5 percent.

Elsewhere, lingering worries over the health of the global economy pushed oil prices lower Monday, as traders ignored advancing stock markets and focused on fears of slipping demand.

Light, sweet crude for December delivery traded as high as $69.19 before falling back. By mid-afternoon London time it was down $2.32 at $65.49 a barrel.

On the currency front, the dollar was steady at 98.48 yen, while the euro was up 0.2 percent at $1.2770.

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AP Business Writers Madlen Read in New York and Jeremiah Marquez in Hong Kong contributed to this report.