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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.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%. After a heavy sell-off in Asia, markets in Europe have spiralled downwards - with key indexes in London and Frankfurt all losing more than 2%.
Analysts blamed mounting concerns about the health of US financial institutions and possible global fall-out.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.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. Meanwhile surging inflation - which hit 3.8% last month in the UK - has also unnerved traders.
'Sapping confidence''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.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.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 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.""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 exposureAsia 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.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%. The financial sector in Germany was also hit where the Dax index lost 2.4%.
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.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. Meanwhile France's Cac 40 index, down 1.8% 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%. A sell-off in Asia hit Hong Kong's Hang Seng index, down 3.8%, while Japan's Nikkei 225 index slid 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.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. These losses took Japan's Nikkei 225 - which has lost 11% of its value in the past month - to its first sub-13,000 points close since 15 April.
In Hong Kong, China's top lender ICBC fell 4.3% and China Construction Bank lost 4.5%.In Hong Kong, China's top lender ICBC fell 4.3% and China Construction Bank lost 4.5%.