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US concerns prompt market falls | US concerns prompt market falls |
(about 1 hour later) | |
Global shares have fallen sharply with London's FTSE 100 index seeing about £35bn wiped off its value as it faces its lowest close since October 2005. | |
After a heavy sell-off in Asia, markets in Europe have spiralled downwards - with key indexes in London, Paris and Frankfurt all losing more than 2%. | |
Analysts blamed mounting concerns about the health of US financial institutions and possible global fall-out. | |
Oil moving back above $146 a barrel has also added to investor worries. | |
Meanwhile surging inflation - which hit 3.8% last month in the UK - has also unnerved investors. | |
'Sapping confidence' | |
Markets had steadied as traders absorbed details of the US government-backed rescue of Freddie Mac and Fannie Mae - in the aftermath of the collapse of another lender IndyMac. | |
But while this was initially well received, analysts say optimism appears to have faded. | |
"The problems Fannie Mae and Freddie Mac face still highlight issues which are fundamental to the market," said Henk Potts, equity strategist at Barclays Stockbrokers. | |
"The reality is everyday investors are looking at runaway inflation, falling house prices, weak business and consumer confidence surveys and that continue to sap away investors' confidence." | |
Asia exposure | Asia exposure |
In the UK, the FTSE 100 hit its lowest level since 2005 - with banks including Royal Bank of Scotland and Lloyds TSB among the biggest fallers. | |
The financial sector in Germany was also hit where the Dax index lost 2.7%. | |
Germany's leading index is heading for its lowest close since October 2006, as a survey suggesting that investor confidence was at a record low was released. | |
Meanwhile France's Cac 40 index, down 2.3% on the day, faces its worst finish in more than three years. | |
A sell-off in Asia hit Hong Kong's Hang Seng index, down 4%, while Japan's Nikkei 225 index lost 2% and Chinese shares fell 3%. | |
Of the Asian losses, banks were the hardest hit as investors worried that US financial market woes would spill over to Asia. | Of the Asian losses, banks were the hardest hit as investors worried that US financial market woes would spill over to Asia. |
In Japan, Mitsubishi UFJ Financial and Mizuho Financial Group both lost 5% over worries about their exposure to debt issued by Fannie Mae and Freddie Mac - who own or guarantee almost half of all US home loans. | |
These losses took Japan's Nikkei 225 index 255.60 points lower to finish at 12,754.56 - the first time it has closed below 13,000 since 15 April. | |
In Hong Kong, China's top lender ICBC fell 4.3% and China Construction Bank lost 4.5%. |