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Stock market turbulence persists US drives stock market sell-off
(about 2 hours later)
Stock markets around the world remain volatile after the heavy losses of recent days, with share prices falling in Asia for a third straight session. World shares have dropped for a third day on concerns about economic growth and the outlook for corporate profits.
Markets made initial gains in London, Paris and Frankfurt, taking their lead from the US, where the benchmark Dow Jones index closed up 0.4%. A shaky and volatile morning in Europe and Asia was compounded by big falls on US markets when they opened.
But continuing economic concerns meant that UK, French and German markets were all in negative territory by lunchtime. In early trading, the key US Dow Jones index slipped 1.4%, with the S&P down 1.5% and the Nasdaq losing 1.8%.
The Shanghai market fell 2.9% while the key Nikkei index fell 0.8% in Japan. In London, the UK FTSE 100 index had lost 1.5%, Germany's Dax was down 1.9% and France's Cac shed 2.1%. Earlier in the day, indexes had fallen in Asia.
The global stock slide was fuelled by speculation that China's government would try to clamp down on illegal share trading and may impose a capital gains tax on stock market earnings. "Right now, everything and anything is viewed in a negative light," said stock analyst Dick Green. "It will take a while for the fears to calm down."
Shares fell 9% in Shanghai on Tuesday, their biggest daily reverse in 10 years, and dropped a further 87.99 points on Thursday. Spreading out
US developments The sell-off was triggered on Tuesday by fears of a new tax in China, but has since spread to wider concerns about the state of the US economy and strength of the mortgage market.
Investors have also been unnerved by signs of a sharp slowdown in the US economy, whose health is crucial to the future direction of global economic growth.
Investors are still wondering if the storm is actually over or not Masatoshi Sato, Mizuho Investors Securities Send us your experiences Q&A: World stocks slump
Analysts are waiting for a raft of economic figures which will be released in the US later on Thursday, including data on consumer spending.
"The biggest risk in the next few weeks is likely to come from the US data front and developments in the mortgage and housing markets," said analysts at JP Morgan Chase.
On Wednesday, figures from the US Commerce Department showed that the US economy grew at a slower-than-expected pace of 2.2% in the last three months of 2006.On Wednesday, figures from the US Commerce Department showed that the US economy grew at a slower-than-expected pace of 2.2% in the last three months of 2006.
Other figures showed that spending on new home building fell 19.1% during the quarter, the sharpest drop since early 1991, adding to worries over the state of the housing market in the world's largest economy.Other figures showed that spending on new home building fell 19.1% during the quarter, the sharpest drop since early 1991, adding to worries over the state of the housing market in the world's largest economy.
Japanese shares continue to fall At the same time, investors are questioning whether stock prices have climbed too high, too quickly.
However, US Federal Reserve chairman Ben Bernanke sought to reassure the market on Wednesday that the global slide was not a sign of deeper concerns, following remarks by his predecessor Alan Greenspan about the possibility of a recession. A number of the world's main indexes have broken records recently, and analysts said that corporate earnings may not be good enough to underpin the gains.
The Dow Jones Industrial Average, which closed down 416 points - or 3.3% - on Tuesday, clawed back 52.39 points, or 0.43%, to end the day at 12,268.63.
In response, the FTSE 100 index in London made early gains but by lunchtime it was down 35.5 points at 6,136.
'Aftershocks'
Henk Potts, from Barclays Wealth, said trading in London had been "calmer" than in the past two days but that concerns about the Chinese economy were still worrying investors.
"The Chinese economy has become an integral part of the global economy and we have really been feeling the effects in London," he said.
Prior to the recent market turbulence, stock prices had reached record levels in a number of key world markets, prompting some analysts to fear they may have gone too high, too fast.
The question facing many investors is how far and how long the fall in prices will last, and whether or not the bull run that has driven stocks and indexes higher has now broken.
"Investors are still wondering if the storm is actually over or not," said Masatoshi Sato, a senior strategist at Mizuho Investors Securities."Investors are still wondering if the storm is actually over or not," said Masatoshi Sato, a senior strategist at Mizuho Investors Securities.
"Aftershocks in some markets, where prices are overvalued, may be seen from now on. Volatile and sensitive trading is likely to continue at least until mid-March," he added."Aftershocks in some markets, where prices are overvalued, may be seen from now on. Volatile and sensitive trading is likely to continue at least until mid-March," he added.