By Keith Weir and Claudia Parsons
LONDON/NEW YORK (Reuters) - The global financial crisis scuppered a $17 billion petrochemicals joint venture and drove three Japanese insurers into merger talks, while data from Europe showed the region's economies face a bleak 2009.
Israel's assault on Gaza added another element of risk to the mix on Monday, sending oil and gold prices higher and weighing down the dollar.
"It's a terrible situation and it just seems to be again causing major concerns for all the markets," Peter McGuire, managing director at Commodity Warrants Australia, said of the Gaza violence.
Consumers, investors, central bankers and politicians are hoping to see some signs of recovery next year from the worst downturn since the 1930s as governments pump over $1 trillion into their ailing economies.
However, it looks like being a long haul everywhere.
U.S. stock indexes fell again as the collapse of a $17 billion joint venture between Kuwait and Dow Chemical threatened to unravel one of the large merger deals of the year and overshadowed gains in energy shares on rising oil prices.
The planned Dow joint venture had angered some Kuwaiti parliamentarians who said it was not economically viable amid the global financial crisis and slumping petrochemical sales.
This year will see one of the biggest ever stock market falls. The U.S. S&P 500 benchmark was down 41 percent with three trading days left in 2008. Its biggest yearly drop was in 1931 in the Great Depression when it fell 47.1 percent.
The fallout has hit all sectors from banks to autos to commodities and resources. Unemployment has climbed, house prices have plummeted and cash-strapped consumers have curtailed spending, heaping more pressure on companies struggling to survive recession.
Three big Japanese insurance companies were the latest firms considering a merger to tackle a downturn that has hit demand for car and fire insurance in the world's second-largest economy.
Shares of Mitsui Sumitomo Insurance Group Holdings Inc, Aioi Insurance Co and Nissay Dowa General Insurance Co surged on Monday on hopes that a merger would increase profits and reduce competition.
Data from South Korea underlined the broad impact of the crisis. Central bank data showed consumer sentiment tumbled to a 10-year low in December as household incomes fell and the jobs market worsened.
In Europe, sentiment among Italian businesses hit the lowest level recorded in a monthly survey dating back to January 1991 and data showed the French economy grew only 0.1 percent in the third quarter.
A report by Britain's Chartered Institute of Personnel Development forecast as many as 600,000 people could lose their jobs in Britain next year.
Russia devalued the rouble again on Monday and Kremlin leaders urged government unity to deal with the biggest economic challenge in a decade.
CURRENCY MOVES
A surging yen was cited by analysts as part of the motivation for the insurance merger, because it has eroded the value of the insurers' foreign-currency assets.
Yen strength has prompted official concern, underscored on Monday by Finance Minister Shoichi Nakagawa, who told the Financial Times that he was watching volatility in the foreign exchange market with alarm.
The yen has surged more than 18 percent against the U.S. dollar this year, slamming Japanese exporters like Toyota and Sony and triggering speculation the government may intervene to halt the currency's rally.
"Every day I am looking at the market developments with a sense of alarm and urgency," the paper quoted Nakagawa as saying in reference to yen volatility in an interview.
The dollar fell, eroded by a grim economic outlook and concerns Israeli attacks in the Gaza strip will destabilize the Middle East and threaten oil supplies.
Sterling hit a record low against the euro, approaching parity with the single currency, after reports pointed to a further slide in UK home prices in 2009.
The Swiss franc jumped as well as gold and oil prices as Israeli warplanes pounded the Hamas-ruled Gaza Strip for a third consecutive day.
"Geopolitics had disappeared from the oil scene for the last couple of months but will regain some price premium with the latest Israeli attack in Gaza," Olivier Jakob, of consultants Petromatrix, said in a research note.
U.S. light, sweet crude was up $1.16 at $38.87 a barrel by 10:06 a.m. EST, below a session high of $42.20.
Oil is on track for a nearly 60 percent loss this year, the biggest annual fall since futures began trading 25 years ago.
(Reporting by Reuters bureaux worldwide; Editing by Neil Fullick/Richard Hubbard/Clive McKeef)
