U.S. Stock Markets

U.S. stocks fell Monday after European Central Bank President Mario Draghi made cautious comments on the state of Europe's economy and as bank stocks sagged in expectation of tighter capital standards.

The Dow Jones Industrial Average shed 35 points, or 0.3%, to 11832 in afternoon trading, after posting a slim advance early in the day. The Standard & Poor's 500-stock index shed seven points, or 0.5%, to 1213, and the Nasdaq Composite lost 13 points, or 0.5%, to 2542.

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Trading volume was light as many investors were closing their books for the year. About 2.1 billion shares had changed hands in New York Stock Exchange composite volume by early afternoon. Average daily volume this year has been about 4.3 billion shares.

Meanwhile, bank stocks were the weakest performers after The Wall Street Journal reported that the Federal Reserve is set to embrace rules by regulators in Basel, Switzerland, requiring major financial institutions to hold extra capital.

J.P. Morgan Chase lost 3.2%, and Bank of America shed 3.7% to lead the blue-chip Dow's decliners. Caterpillar was one of Monday's strongest blue-chip stocks, rising 1.1% after the machinery company reported sales of construction and mining machinery rose 30% in the three months to the end of November, highlighted by strong growth in North America.

The economic calendar was light. A reading on home builder confidence in December rose to 21 from a downwardly revised 19 last month, reaching the highest level since May 2010.

European Stock Markets

European stock markets ended mostly flat to lower Monday, with investors cautious after comments by European Central Bank President Mario Draghi on the state of the European economy, together with general nervousness about the outcome of a conference call of euro-zone ministers.

Traders were expecting word on fiscal-consolidation efforts and on International Monetary Fund support for ailing countries from the teleconference call.

The benchmark Stoxx Europe 600 index closed nearly flat at 233.75. Nationally, the U.K.'s FTSE 100 index was down 0.4% at 5364.99, France's CAC-40 index rose 0.1% to 2974.20 and Germany's DAX lost 0.5% to 5670.71.

Traders noted that with this week being the final one in the run-up to the holiday break, trading has been particularly choppy with volatility keeping markets on edge. In corporate activity, retailer Carrefour jumped 3.7% and chocolate maker Barry Callebaut rose 2.6%. Shares of heavyweight component Nestle rose 1.9%. Credit Suisse reinstated coverage of Nestle with a neutral rating and said its shares' modest premium to other food companies is fully justified.

Asia-Pacific Stock Markets

Asian stock markets dropped sharply Monday, as news of North Korean leader Kim Jong Il's death heightened fears of instability on the Korean Peninsula and sent the Seoul share market and won skidding to multi-week lows.

Analysts said Kim's death has added a dangerous layer of instability to the Korean peninsula with many Asian neighbours uneasy about the leadership transition phase in one of the world's most reclusive regimes.

South Korea's Kospi Composite briefly fell 4.9% to its lowest level since mid-October, and closed down 3.4% at a four-week low.

The won tumbled to over two-month lows before recovering somewhat. Japan's Nikkei Stock Average finished down 1.3%, Hong Kong's Hang Seng Index fell 1.2%, and China Shanghai Composite closed down 0.3%.

Some of the markets came off their lows as ratings agencies retained South Korea's credit ratings, but warned that Kim's death causes more risks for the security situation on the Korean Peninsula.

Growth-sensitive stocks continued to underperform as investors fretted about the darkening global growth outlook. Sony dropped 3% in Tokyo, and Samsung Electronics lost 3.6% in Seoul, while Esprit tumbled 6.5% in Hong Kong and Shanxi Xishan Coal & Electricity Power Co. fell 1.3% in Shanghai.

Commodities
Base metals closed lower on the London Metal Exchange Monday in thin, nervous market conditions as investors kept to the sidelines ahead of the year end and as a stronger dollar weighed on prices. At the close, flagship three-month copper was 1.2% lower on the day at $7,259 a metric ton amid a broadly lower complex.

Aluminum saw the heaviest losses of the complex Monday, closing 2.1% lower at $1,961/ton. Crude futures rose Monday, recovering slightly from six-week lows as traders keep watch on Europe for signs of progress in stemming the debt crisis.

Light, sweet crude for January delivery settled 35 cents, or 0.4%, higher at $93.88 a barrel on the New York Mercantile Exchange.

Brent crude for February delivery on the ICE futures exchange traded 28 cents higher at $103.63 a barrel. Oil prices were higher through much of Monday's session and held to gains after a conference call between euro-zone finance ministers led to new action to help support debt markets.

Euro-zone ministers agreed that the currency bloc's members will provide EUR150 billion in loans to the International Monetary Fund, a euro-zone official said.

Gold futures ended lower, failing to hold on to the $1,600 level amid pressure from downbeat comments by the European Central Bank and as buyers remain unwilling to take new positions ahead of the holidays. The most actively traded gold contract, for February delivery, fell $1.20, or 0.1%, to settle at $1,596.70 a troy ounce on the Comex division of the New York Mercantile Exchange.