World stocks in meltdown over US economy fears
European and Asian stock markets sank on Wednesday, mirroring losses the previous day in New York, on mounting fears that weakness in the US housing sector could infect the world economy.
However, the major European stock markets wiped out some of their losses of earlier in the day, amid a mixed opening on Wall Street.
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In London the FTSE 100 index lost 1.72 percent to close at 6,250.60 points, while in Paris the CAC 40 lost 1.68 percent to 5,654.30 while in Frankfurt the Dax lost 1.45 percent to finish at 7,473.93 points.
The DJ Euro Stoxx 50 index of top eurozone shares lost 1.82 percent to 4,237.05 points.
The euro stood at 1.3679 dollars.
The yen meanwhile hit a four-month high against the dollar and oil passed an all-time peak in New York as investors exited risky investments and turned to safe-havens, dealers said.
Across the Atlantic US shares traded mixed in morning deals in a choppy session following the prior day's selloff as investors worried about contagion from credit problems linked to the ailing US housing sector.
Japanese stocks slumped by more than two percent on Wednesday, with the Nikkei-225 index ending below 17,000 points for the first time in more than four months.
In New York the Dow Jones Industrial Average was up 0.14 percent to 13,230.52 around 1540 GMT while the Nasdaq composite fell 0.42 percent to 2,535.61.
The broad-market Standard Poor's 500 index edged down 0.08 percent to 1,454.17.
On Tuesday shares nose-dived amid news of spreading troubles in the mortgage sector that led investors to shrug off positive economic and earnings reports.
"It doesn't matter that the direct implications of these specific problems are not large for the overall economy. They are bringing forth fears of deeper problems in the flow of credit throughout the economy," said Dick Green, an analyst at Briefing.com.
"These concerns are legitimate but impossible to quantify," he said. "The risks of a market downturn on any negative news related to mortgages or credit standards remains significant."
Wall Street took a pounding Tuesday, with its three main markets closing down more than 1.0 percent as news of spreading troubles in the US mortgage sector prompted investors to bank profits.
Economists said there were growing jitters about the potential fallout from problems in US subprime lending sector, where mortgages are provided to people with questionable credit histories.
Analysts are concerned that growing mortgage defaults will hurt banks and finance companies enough to curb the availability of credit on which the economy feeds.
That, in turn, could affect private equity groups because their takeover bids are often financed by large amounts of bank debt.
"The central issue that concerns the equity market is really the extent to which this whole subprime fallout will affect a general credit squeeze and reverse the expansion we have seen in the global economy," said Mike Lenhoff, chief strategist at Brewin Dolphin Securities in London.
"There is this worry now that the ease with which lending has taken place and the ease with which there has been access to borrowing to finance the global economy is being unwound."
No market was immune to plunging equities on Wednesday, as Hong Kong's key Hang Seng Index closed down 3.15 percent, China share prices shed 3.81 percent and Indian's main equity market plunged 3.96 percent.
Sydney's main stock market meanwhile dived 3.3 percent after market favourite Macquarie Bank said two high-yielding funds faced losses of up to 300 million dollars (258 million US).
Shares in Macquarie Bank, known for its deal making and massive executive pay-checks, shed 10.7 percent as a result, enough to prompt Australian Treasurer Peter Costello to offer assurances that all was well.
US stocks had powered ahead on Monday as investors shrugged off unease about a widening economic crisis that led to last week's bruising for the equity market.
"We're likely to see the volatility persist for a while," Lenhoff said.
"We'll have some good days, we'll have some bad days and eventually we'll see a slightly clearer picture of what this subprime fallout really means for the banks as well as for the credit markets.
"In turn that will hopefully help the credit markets to settle down and move ahead," he added.
Losses were widespread in Europe. In Amsterdam the AEX index fell 1.79 percent to 524.45 while Milan's SP/Mib dropped by 2.04 percent to 39,401, and in Madrid the Ibex-35 lost 1.40 percent to 14,595.7.
In Brussels the Bel-20 closed 1.66 percent lower at 4,311.80 points.
World stocks in meltdown over US economy fears
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