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US concerns prompt market falls US concerns prompt market falls
(about 2 hours later)
Global shares have fallen sharply with London's FTSE 100 index seeing about £40bn wiped off its value as it faced its lowest close since October 2005. Global shares have fallen sharply with London's FTSE 100 index losing about £32bn of its total value and closing at its lowest point since October 2005.
After a heavy Asian sell-off, markets in Europe spiralled downwards - London slipping 3% and Frankfurt down more than 2% while Wall Street opened lower. Analysts blamed mounting concerns about the health of US financial institutions and possible global fall-out. Stock markets also fell in the US, Asia and across mainland Europe.
Oil moving back close to $146 a barrel has also added to investor worries. Analysts blamed mounting concerns about the health of US financial institutions and possible global fall-out.
Meanwhile surging inflation - which hit 3.8% last month in the UK - has also unnerved traders. Other negative factors included oil moving back close to $146 a barrel, and surging UK inflation, where consumer price growth hit an 11-year high.
'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. The trigger for the latest slide in share prices was news that the US government had taken steps to protect mortgage firms Freddie Mac and Fannie Mae.
But while this was initially well received, analysts say optimism appears to have faded. Markets had initially steadied as traders absorbed the details of the US move, following the collapse of another lender, IndyMac.
But while the plan was well received at first, analysts say optimism faded as investors focused on other, more negative issues.
"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."
On Wall Street, key markets lost ground in early trading - the Dow Jones index shedding 160 points, 1.5% to 10,891.1 and the Nasdaq falling 1.3% to 2,184.5 points. On Wall Street, the Dow Jones index had shed 56.83 points, 0.5%, to 10,998.36 points in afternoon trading, though the Nasdaq was up slightly, gaining 1.7 points, or 0.1%, to 2214.54 points.
Economic difficultiesEconomic difficulties
Analysts said that testimony to the Senate Banking Committee from Federal Reserve chairman Ben Bernanke and Treasury Secretary Henry Paulson was being watched closely.Analysts said that testimony to the Senate Banking Committee from Federal Reserve chairman Ben Bernanke and Treasury Secretary Henry Paulson was being watched closely.
Mr Bernanke said the economy was being confronted by "numerous difficulties" including persistent strains in financial markets, rising joblessness and housing problems.Mr Bernanke said the economy was being confronted by "numerous difficulties" including persistent strains in financial markets, rising joblessness and housing problems.
In the UK, the FTSE 100 dropped 3% to 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 dropped 2.4% to its lowest close since October 2005 - with bank Royal Bank of Scotland and Carphone Warehouse 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 1.9% and hit its lowest point since October 2006.
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 ended 1.9% on the day, its worst finish in more than three years.
Meanwhile France's Cac 40 index, down 2.3% on the day, faced its worst finish in more than three years. Eastern woes
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%.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 - which has lost 11% of its value in the past month - to its first sub-13,000 points close 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%.
India's main Sensex stock index lost 4.9% in Mumbai.