HONG KONG (AP) -- World shares fell Thursday, weighed down by ongoing fighting in Libya and a larger than expected contraction in Japan's economy.
Traders are keeping a wary eye on oil prices, which have been driven higher during weeks of anti-government unrest that has shut down most of Libya's 1.6 million barrels per day of crude production.
"Oil prices now are the major concern in the market," said Jackson Wong, a vice president at Tanrich Securities.
Benchmark crude for April delivery rose 37 cents to $104.75 a barrel in electronic trading on the New York Mercantile Exchange. In London, Brent crude for April delivery was up 16 cents to $116.10 a barrel on the ICE Futures exchange. Sustained higher oil prices could put a damper on the economic recovery by adding to costs for businesses. The dollar was higher against the yen and the euro.
In early European trade, France's CAC-40 edged 0.9 percent lower to 3,957.90, Britain's FTSE 100 dipped 0.6 percent to 5,897.93 and Germany's DAX lost 0.8 percent to 7,074.90.
Wall Street was poised to extend Wednesday's losses, with Dow futures down 70 points at 12,104.00. Broader S&P futures lost 9.5 points to 1,305.90.
In Asia, Japan's Nikkei 225 stock average ended 1.4 percent lower at 10,434.38 after the government said the economy shrank 1.3 percent in the fourth quarter. That's more than preliminary data last month suggested. Toyota Motor Corp. tumbled 1.7 percent, and major bank Mitsubishi UFJ Financial Group Inc. fell 1.6 percent.
Chinese shares fell on expectations that February inflation data due out Friday would be lower than the previous month but still higher than the government's 4 percent target.
The Shanghai Composite Index lost 1.5 percent to close at 2,957.14. The Shenzhen Composite Index of China's smaller, second exchange lost 0.7 percent to 1,302.65. Shares in medical instrument makers and wine companies led gains while coal miners and financials weakened.
"There might be an adjustment in the next one or two days, but I expect share prices to rally after that," said Yang Yining, an analyst at Capital-Edge Investment & Management Co. in Shanghai.
"The market should do well in the second half of the year, since the tighter controls on the housing market will force more investment into shares."
South Korea's Kospi extended losses after the central bank raised its key interest rate for the second time in three months. The index fell 1 percent to 1,981.58.
Hong Kong's Hang Seng index retreated 0.8 percent to 23,614.89.
Cathay Pacific Airways, Hong Kong's biggest airline, fell 2.5 percent a day after company executives reported annual profit tripled to a record but warned that higher oil prices threatened profitability in 2011.
Shares of Hong Kong-listed Gome Electrical Appliance Holdings rose 0.7 percent after its jailed founder, Huang Guangyu, prevailed in a feud over control of China's largest appliance retailer with the departure of his rival, Chairman Chen Xiao.
New Zealand's main stock index appeared to buck the trend by edging up in morning trading after the country's central bank cut its key interest rate to 2.5 percent from 3.0 percent. But by the afternoon, it too sank into the red, ending 0.1 percent lower. The central bank described the rate cut as a pre-emptive move to soften the economic impact of last month's destructive earthquake in the city of Christchurch.
Benchmarks in Australia, Taiwan, Singapore and also lost ground.
In New York on Wednesday, stocks slipped as crude oil prices hovered near $104 a barrel, continuing a three-week run of high prices that economists say could slow the economic recovery.
Fighting between rebels and forces loyal to Libyan leader Moammar Gadhafi set two oil installations ablaze and inflicted yet more damage on the country's crippled energy industry.
The Dow Jones industrial average fell 1.29, or less than 0.1 percent, to 12,213.09.
The broader S&P index lost 1.80 points, or 0.1 percent, to close at 1,320.02. The Nasdaq composite fell 14.05, or 0.5 percent, to 2,751.72.
In currencies, the dollar rose to 82.81 yen from 82.70 yen late Wednesday. The euro stood at $1.3815 from $1.3904.
Researcher Fu Ting in Shanghai contributed to this report.
(Copyright 2011 by The Associated Press. All Rights Reserved.)