Japan recession deepens
Major European markets are down more than 1.5% as Japan posts another trade deficit.
(CNN) -- European markets slipped solidly into negative territory on Monday, following news of a deepening recession in Japan and slumping sales at Toyota.
The continent's major markets - London, Paris and Frankfurt - were all down more than 1.5%.
Asia and Pacific markets were mixed, but mostly lower as Japan posted its second trade deficit in as many months.
Tokyo's Nikkei average closed 1.6% higher on Monday, but much of the discouraging news came after the markets were done for the day.
Japan reported a 223.4 billion yen ($2.5 billion) deficit in November, according to the Finance Ministry. Global exports were down 27%, while exports to the United States slumped 34%.
"Japan's economic conditions have been deteriorating," the Bank of Japan said in a report released Monday. "Exports have decreased. Corporate profits have continued to decrease, and business sentiment has also deteriorated."
A slumping global economy is also hurting the bottom line at Toyota. The Japanese automaker said its net revenues are down 6.3% compared to a year ago. Toyota (TM) predicted it will post an operating loss for the year -- it's first ever in modern history.
The other major indices across the region traded lower on Monday. Australia's All Ordinaries index closed down 0.8%. In Seoul, the KOSPI slipped 0.1% and Hong Kong's Hang Seng lost 3.3%.
Wall Street was mixed on Friday. The Dow lost a third of a percent to end the week, while the NASDAQ gained about three-quarters of a percent and the Standard and Poor's 500 gained 0.3%.
Stocks capped the rocky week as investors digested the Bush Administration's $13.4 billion auto bailout. The major indexes seesawed all week amid another interest rate cut by the Federal Reserve and dismal financial reports from Morgan Stanley (MS, Fortune 500) and Goldman Sachs (GS, Fortune 500).
Investors return Monday for the last few trading days of what has been a tumultuous year and face a slew of economic reports in a holiday-shortened trading week.
The days before Christmas bring U.S. reports on housing, the GDP, personal income and spending, and the latest reading on initial unemployment claims.
Trading could also be volatile with many investors out for the Christmas holiday. U.S. markets will close early Wednesday and will remain closed on Thursday.
Swings in the market are often amplified when fewer market participants are present. So even a modest amount of buying could turn into a more substantial rally.
"We could rally (this) week just because no one's here," said Dave Rovelli, managing director of U.S. equity trading at Canaccord Adams in New York.
And the market could find some short-term support "from a relief standpoint," said Abigail Doolittle, a portfolio manager at Johnson Illington Advisors, which has nearly $700 million in assets under management.
Doolittle said the government's support of the auto industry and optimism about President-elect Barack Obama's economic stimulus plans may buoy the market.
But given the outlook for first-quarter corporate results, a long-term rebound is unlikely, said Rovelli.
Indeed, fourth-quarter earnings per share for the companies in the S&P 500 are forecast to decline more than 10%, according to estimates from Thomson Financial. 
