Europe trades higher as Asia loses ground

(CNN) -- Europe's major markets gained ground Tuesday, ignoring slumping indices in Asia and on Wall Street.

London and Paris were both up about three-quarters of a percent in early trading, while Frankfurt was narrowly higher.

In contrast, Asian and Pacific markets were universally lower Tuesday.

Australia's All Ordinaries index dropped 0.7 percent, while Hong Kong's Hang Seng index slipped 2.8 percent, the Shanghai composite index fell 4.6 percent and Seoul's KOSPI index tumbled 3 percent.

Tokyo's Nikkei exchange was closed Tuesday.

Meanwhile, Wall Street stocks fell Monday in a thinly-traded session amid concerns about fourth-quarter corporate earnings, falling oil prices and ongoing woes in the auto industry.

The Dow Jones Industrial Average fell 0.7 percent, or 59.42, to 8,519.69. The Standard & Poor's 500 index dipped 2 percent to 871.63 and the Nasdaq composite was down 1.8 percent to 1,532.35.

Stocks languished for most of the morning before falling sharply in the afternoon as oil prices fell below $40 a barrel, sending shares of Chevron and Exxon Mobil lower and weighing on the Dow. But the major indexes recovered some ground near the closing bell.

Prices for U.S. Treasury bonds fell as the government auctioned $92 billion in short-term debt. Gold prices rose.

"The general sentiment remains very weak," said David Levy, a portfolio manager at Kenjol Capital Management.

The market could be pressured in the weeks ahead as companies begin reporting fourth-quarter results, which are expected to remain soft, Levy added.

Still, December and January are traditionally some of the best months for stocks, and many investors say January sets the tone for the rest of the year.

"There's no doubt that there are plenty of opportunities in the market," Levy said. "But we can't say if there are other shoes left to drop."

Stocks may find some support early next year as details about President-elect Barack Obama's stimulus plan become apparent, according to Art Hogan, chief market strategist at Jefferies & Co. in New York. Obama has called for an economic stimulus that would focus on rebuilding infrastructure and creating jobs. It is projected to cost between $500 billion and $700 billion over two years.

"As we get answers and more clarity on the fiscal stimulus plan, I think this market is going to celebrate that news," Hogan told CNNMoney.com.

Trading is expected to be volatile this week, with many market participants out for the holiday. Markets will close early on Wednesday and will remain closed on Thursday for the Christmas holiday.

Market breadth was negative. Declining shares outnumbered advancers by more than 2-to-1 with about 90 million shares changing hands on the New York Stock Exchange.

Shares of General Motors fell more than 20 percent after analysts at Credit Suisse and warned that the nation's leading automaker may already be drained of equity.

Meanwhile, shares of Toyota fell after Japan's leading car maker warned it will suffer an operating loss next year. Toyota has been hit by declining U.S. sales and a stronger yen, which hurts profits when overseas sales are converted into the Japanese currency.

Truck and tractor maker Caterpillar announced plans to layoff more than 800 employees at one of its engine plants and said it will take other steps to cut costs. The stock fell nearly 3 percent.

Moody's Investor Services placed Alcoa's credit rating under review for a possible downgrade due to weakening demand and falling aluminum prices. Alcoa shares ended down 5 percent.

Shares of drugstore chain Walgreens fell after the company said its first-quarter net income fell 11 percent and announced plans to further limit store openings next year. Walgreens posted net income of $408 million, or 41 cents a share, for the quarter ended Nov. 30, compared with $456 million, or 46 cents a share, a year earlier. Analysts were expecting earnings per share of 46 cents.

Insurance giant American International Group said it will sell Hartford Steam Boiler, a subsidiary equipment insurer, to Munich Re Group for $742 million in cash and $76 million in stock.

AIG has been allocated more than $150 billion in government financing and was effectively nationalized in September. The company, which nearly collapsed earlier this year, has said it will repay the government loans by selling assets.

Shares of AIG were up about 3 percent.

The market is also being pressured by concerns about anemic consumer spending. In the latest sign of consumer distress, online holiday sales registered a declined for the first time in seven years, according to sales tracker ComScore.

Online spending for the first 49 days of the critical November-December gift-buying period fell 1 percent to $24.03 billion compared to $24.15 billion over the same period last year, ComScore said.