By PAN PYLAS?AP Business Writer

LONDON (AP) _ World markets traded lower Wednesday despite strong gains in Asia overnight as investors booked profits after Senator Barack Obama won the U.S. presidential election and the Democrats took a firmer hold on Congress.,”World markets cash in on Obama win

By PAN PYLAS?AP Business Writer

LONDON (AP) _ World markets traded lower Wednesday despite strong gains in Asia overnight as investors booked profits after Senator Barack Obama won the U.S. presidential election and the Democrats took a firmer hold on Congress.

On Wall Street, the Dow Jones industrial average fell 170.53 points, or 1.77 percent, to 9,454.75, while the Standard & Poor's 500 index dropped 18.30, or 1.82 percent, to 987.45

The FTSE 100 index of leading British shares was down 106.49 points, or 2.3 percent, at 4,533.04, while Germany's DAX was 103.21 points, or 2.0 percent, lower at 5,174.83. The CAC-40 in France was 85.98 points, or 2.3 percent, lower at 3,605.11.

The losses in Europe and the U.S. follow surges Tuesday in anticipation of an Obama victory. The Dow in fact enjoyed its best election day rally since 1984.

"Everyone was buying the rumor yesterday and selling the news today … The market had not only anticipated an Obama victory, but from what I'm gleaning, pretty much a Democratic sweep," said Jack A. Ablin, chief investment officer at Harris Private Bank.

Investors also know that Obama will have his work cut out for him to improve the U.S.'s immediate economic prospects and that Inauguration Day is still more than two months away.

"Between now and then there is unlikely to be much if any positive economic news," said Howard Wheeldon, senior strategist at BGC Partners in London.

Further proof of the scale of the downturn in the world's largest economy came Wednesday with the news that the U.S. service sector contracted sharply in October as new orders and employment fell. The Institute for Supply Management, a trade group of purchasing executives, says the services sector index fell to 44.4 in October from 50.2 in September. Analysts had anticipated a far more modest drop.

A manufacturing report issued Monday by the same organization showed the worst reading since September 1982, when the U.S. was in a deep recession.

Attention in Europe is shifting towards Thursday's expected interest rate reductions Thursday from the European Central Bank and the Bank of England.

Both banks are expected to follow the U.S. Federal Reserve's lead and cut interest rates by at least half a percentage point, though there's growing talk that the Bank of England may reduce interest rates by as much as a full percentage point for the first time since four cuts of that size in 1992-3 when Britain's economy was last mired in recession.

"With the 'Obama-effect' already petering-out in some markets, tomorrow's rate-setting meetings may be of considerable importance in nourishing the prevailing mood of diminished pessimism," said Neil Mellor, an analyst at Bank of New York Mellon.

Earlier, Japan's Nikkei 225 stock average advanced 4.5 percent to 9,521.24, and Hong Kong's Hang Seng Index added 3.2 percent to 14,840.16.

Japanese shares were helped by the sharp fall in the value of the yen in recent days as an appetite for risk returned to the market. Major exporters did particularly well, such as Toyota Motor Corp., up 10.3 percent, Canon Inc., up 11.7 percent and Sony Corp., which advanced 6.3 percent.

Australia's main stock index rose 2.9 percent, and Singapore's key stock measure added 2.6 percent. India's Sensex dropped 2.8 percent.

In South Korea, the benchmark Kospi rose 2.4 percent, though pared gains on profit-taking and some concerns that an Obama presidency could mean a harder line on trade, analysts said.

Elsewhere, oil prices retreated after surging above $70 a barrel overnight. Light, sweet crude for December delivery was changing hands at $68.65, down $1.88.

On the currencies front, the euro was down 0.4 percent, at $1.2918, and the dollar was 0.9 percent lower at 98.79 yen.

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