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Heavy losses sweep world markets Heavy losses sweep world markets
(20 minutes later)
London's FTSE 100 fell below the 6,000 level as uncertainty over the impact of losses in the US sub-prime lending market persisted.London's FTSE 100 fell below the 6,000 level as uncertainty over the impact of losses in the US sub-prime lending market persisted.
The index of leading UK shares lost 3.6% to 5,891.8 points by 1305 BST on the back of heavy falls in Asia and further declines on Wall Street.The index of leading UK shares lost 3.6% to 5,891.8 points by 1305 BST on the back of heavy falls in Asia and further declines on Wall Street.
Concern about the state of world credit markets saw the US Dow Jones index close below 13,000 on Wednesday.Concern about the state of world credit markets saw the US Dow Jones index close below 13,000 on Wednesday.
Japan's Nikkei index lost 2%, with shares down 3.7% in Hong Kong.Japan's Nikkei index lost 2%, with shares down 3.7% in Hong Kong.
France's Cac-40 index was 3.1% lower while Germany's Dax-30 was down 2.6%France's Cac-40 index was 3.1% lower while Germany's Dax-30 was down 2.6%
The FTSE has not fallen below 6,000 during a trading session since March this year and last closed below 6,000 in October 2006.The FTSE has not fallen below 6,000 during a trading session since March this year and last closed below 6,000 in October 2006.
Almost £110bn has been wiped off the value of leading shares since last Wednesday.Almost £110bn has been wiped off the value of leading shares since last Wednesday.
The problems in the sub-prime mortgage market will linger on for a while Bart IngelsFortis Bank analyst Q&A: World stock market falls What's causing credit crunch? The problems in the sub-prime mortgage market will linger on for a while Bart IngelsFortis Bank analyst Q&A: World stock market falls What's causing credit crunch? class="" href="http://www.bbc.co.uk/blogs/thereporters/robertpeston/2007/08/paulsons_predicament.html">Peston's Picks: where's the risk?
In the US, the Dow ended 1.3% lower at 12,861.5 points, the first time it has closed below 13,000 since 24 April.In the US, the Dow ended 1.3% lower at 12,861.5 points, the first time it has closed below 13,000 since 24 April.
Unknown scaleUnknown scale
The recent financial market volatility has been triggered by the US sub-prime mortgage sector, which offers higher-risk loans to people with a poor credit history.The recent financial market volatility has been triggered by the US sub-prime mortgage sector, which offers higher-risk loans to people with a poor credit history.
As US interest rates have risen and the housing bubble has burst, a growing number of sub-prime borrowers have defaulted on their loans.As US interest rates have risen and the housing bubble has burst, a growing number of sub-prime borrowers have defaulted on their loans.
This has led to extensive financial difficulties for a number of investment funds with heavy exposure to the sector - and triggered fears of a wider financial crisis.This has led to extensive financial difficulties for a number of investment funds with heavy exposure to the sector - and triggered fears of a wider financial crisis.
While some estimates say $300bn in loans could be at risk, one of the biggest worries for investors is not knowing the eventual scale of the problem.While some estimates say $300bn in loans could be at risk, one of the biggest worries for investors is not knowing the eventual scale of the problem.
Falls in Asia triggered further losses in EuropeFalls in Asia triggered further losses in Europe
Central banks have been trying to restore confidence and avoid a credit squeeze, with the Bank of Japan announcing on Thursday that it would inject a further 400bn yen ($3.4bn) into its banking system.Central banks have been trying to restore confidence and avoid a credit squeeze, with the Bank of Japan announcing on Thursday that it would inject a further 400bn yen ($3.4bn) into its banking system.
However, such moves, along with comments by US Treasury Secretary Henry Paulson that the economy was strong enough to withstand the turmoil, have done little to appease investors.However, such moves, along with comments by US Treasury Secretary Henry Paulson that the economy was strong enough to withstand the turmoil, have done little to appease investors.
In Japan, the Nikkei index closed down 2% at 16,148.49 and elsewhere in Asia, Singapore lost almost 3.7% and Australia's benchmark S&P/ASX 200 lost 1.7% - having at one point suffered its biggest one-day percentage drop in more than seven years.In Japan, the Nikkei index closed down 2% at 16,148.49 and elsewhere in Asia, Singapore lost almost 3.7% and Australia's benchmark S&P/ASX 200 lost 1.7% - having at one point suffered its biggest one-day percentage drop in more than seven years.
And in Mumbai, India's Sensex index lost 4.3% of its value.And in Mumbai, India's Sensex index lost 4.3% of its value.
Credit problemsCredit problems
Australian home loan firm RAMS saw its shares sink 36% after it said it had failed to refinance 6.17bn Australian dollars ($5bn; £2.5bn) in debt after the credit crunch spurred by the crisis in the US housing market.Australian home loan firm RAMS saw its shares sink 36% after it said it had failed to refinance 6.17bn Australian dollars ($5bn; £2.5bn) in debt after the credit crunch spurred by the crisis in the US housing market.
The problems also came to the fore when Merrill Lynch told its clients to sell any shares they own in the country's largest mortgage lender, Countrywide Financial.The problems also came to the fore when Merrill Lynch told its clients to sell any shares they own in the country's largest mortgage lender, Countrywide Financial.
It warned that Countrywide could face bankruptcy if the availability of credit in the market got any worse - and there were market rumours that the lender had failed to raise some money it needed.It warned that Countrywide could face bankruptcy if the availability of credit in the market got any worse - and there were market rumours that the lender had failed to raise some money it needed.
"The problems in the sub-prime mortgage market will linger on for a while," said Bart Ingels, an analyst at Fortis Bank, in Brussels."The problems in the sub-prime mortgage market will linger on for a while," said Bart Ingels, an analyst at Fortis Bank, in Brussels.
"Some days it was a little bit better but then negative news came to the fore, and it will go on like that for a while.""Some days it was a little bit better but then negative news came to the fore, and it will go on like that for a while."
Worries about a slowdown in US consumption were not helped by results from the department store Macy's, which blamed the "difficult" climate for a 77% fall in its quarterly profits.Worries about a slowdown in US consumption were not helped by results from the department store Macy's, which blamed the "difficult" climate for a 77% fall in its quarterly profits.
The US Federal Reserve made another $7bn (£3.5bn) of reserves available to the banking system on Wednesday. The Fed has injected $71bn into the system since 9 August.The US Federal Reserve made another $7bn (£3.5bn) of reserves available to the banking system on Wednesday. The Fed has injected $71bn into the system since 9 August.
Meanwhile, French president Nicolas Sarkozy called on the G7 industrial nations to better monitor financial markets.Meanwhile, French president Nicolas Sarkozy called on the G7 industrial nations to better monitor financial markets.
Countries should ensure that their systems for monitoring potential market problems, he said, adding that, in case of unforeseen events in credit markets, cash should be made available.Countries should ensure that their systems for monitoring potential market problems, he said, adding that, in case of unforeseen events in credit markets, cash should be made available.