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Global shares tumble on US fears Global shares tumble on US fears
(about 1 hour later)
Many of the world's main stock indexes, including the UK FTSE 100, have posted their biggest falls since the terrorist attacks of 11 September, 2001. Global stock indexes, including the UK FTSE 100, have fallen their most since the terrorist attacks of September 11 2001 amid fears of a recession.
The FTSE 100 index tumbled 5.5% to 5,578.2, wiping £84bn ($163bn) off the value of its listed shares.The FTSE 100 index tumbled 5.5% to 5,578.2, wiping £84bn ($163bn) off the value of its listed shares.
Indexes in Paris and Frankfurt slumped by about 7%, while markets in Asia, India and South America also dropped.Indexes in Paris and Frankfurt slumped by about 7%, while markets in Asia, India and South America also dropped.
Investors questioned whether a plan to boost the US economy would do enough to avert a full-blown recession. Investors questioned whether a recent plan to boost the US economy would be enough to avert a full-blown recession.
"It's another horrible day," said Francis Lun of Fulbright Securities in Hong Kong. Last week the US government announced a financial stimulus plan.
"Today it's because of disappointment that the US stimulus is too little, too late and investors feel it won't help the economy recover." US markets are closed for a public holiday on Monday and reopen on Tuesday but other markets worldwide reacted negatively to the US plans.
US markets are closed for a public holiday on Monday and will re-open on Tuesday. Francis Lun of Fulbright Securities in Hong Kong said the falls stemmed from disappointment that the US stimulus was "too little, too late" adding that investors felt "it wouldn't help the economy recover".
'Panic mode''Panic mode'
The worry is that tax breaks and spending measures will do little to boost consumer spending in the US because of problems in the housing market. The worry is that tax breaks and spending measures will not be enough to boost consumer spending in the US, because deeper economic problems remain.
Many shoppers are struggling under higher mortgage repayment costs, and default rates have surged. In particular, the slowing housing market and problems in the sub-prime sector - which lends to those with limited or no credit histories - has contributed to a slowdown.
At the same time, banks have had to become more careful about who they lend to because they have lost billions of pounds on investments linked to the US housing and mortgage markets. "We're falling back into the crisis of confidence in the financial sector," said Hugues Rialan, of Robeco France.
"The banks have been reassuring the market over their exposure to US mortgage-related investments, but now we realise there is nothing reassuring about it," he said.
Finance firms were among the main fallers, with Dutch ING Group, Germany's Allianz and Swiss Re all falling about 10%.
FTSE100 - WORST DAYS 20/10/87 down 12.2%19/10/87 down 10.8%26/10/87 down 6.2%11/09/01 down 5.7%22/10/87 down 5.7%FTSE100 - WORST DAYS 20/10/87 down 12.2%19/10/87 down 10.8%26/10/87 down 6.2%11/09/01 down 5.7%22/10/87 down 5.7%
The state of the US economy is very important to many of Europe's and Asia's biggest companies as it is one of their biggest export markets. Many shoppers are struggling under higher mortgage repayment costs, prompting default rates to surge, especially among sub-prime borrowers.
Any slowdown in demand is likely to hurt corporate profit growth, and push share prices even lower, analysts warned. This has prompted banks to tighten their lending policies after losing huge amounts of investments linked to the US housing and mortgage markets.
"It's becoming more and more difficult as the market is now in panic mode," said Hugues Rialan of Robeco France. The state of the US economy is crucial for many of Europe's and Asia's biggest companies because it is one of their biggest export markets.
"We're falling back into the crisis of confidence in the financial sector.
FTSE100 - BEST DAYS 21/10/87 up 7.9%13/03/03 up 6.1%10/04/92 up 5.6%15/10/02 up 5.1%25/07/02 up 5.0%FTSE100 - BEST DAYS 21/10/87 up 7.9%13/03/03 up 6.1%10/04/92 up 5.6%15/10/02 up 5.1%25/07/02 up 5.0%
"The banks have been reassuring the market over their exposure to US mortgage-related investments, but now we realise there is nothing reassuring about it," he said. Any slowdown in demand is likely to hurt corporate profit growth and push share prices even lower, analysts have warned.
But some analysts took comfort from the prospect of falling US interest rates.But some analysts took comfort from the prospect of falling US interest rates.
"If interest rates are cut to the extent we and others expect, the likelihood is that today's share prices will look like silly values in 12 months' time, if not before," said Mike Lenhoff at Brewin Dolphin Securities."If interest rates are cut to the extent we and others expect, the likelihood is that today's share prices will look like silly values in 12 months' time, if not before," said Mike Lenhoff at Brewin Dolphin Securities.
Global trendGlobal trend
Markets in China, India, South Korea, Singapore, Taiwan and the Philippines all fell.Markets in China, India, South Korea, Singapore, Taiwan and the Philippines all fell.
In Mumbai, the main Sensex index fell 1,408 points, or 7.4%, adding to an 8% fall last week. Hong Kong's Hang Seng slumped 1,383.0 points, or 5.5%, to close at 23,818.9. Tokyo's main Nikkei 225 index fell 3.9%.In Mumbai, the main Sensex index fell 1,408 points, or 7.4%, adding to an 8% fall last week. Hong Kong's Hang Seng slumped 1,383.0 points, or 5.5%, to close at 23,818.9. Tokyo's main Nikkei 225 index fell 3.9%.
We're in the danger zone now Bob Parker,Credit Suisse Asset Management Learn about the 'bear market'
Australia's benchmark ASX 200 index closed down 2.9%, or 166.9, points at 5,580.4, which is its lowest level for a year.Australia's benchmark ASX 200 index closed down 2.9%, or 166.9, points at 5,580.4, which is its lowest level for a year.
We're in the danger zone now Bob ParkerCredit Suisse Asset Management Learn about the 'bear market'
It was also the 11th consecutive negative day for the index, the longest losing streak in more than 25 years.It was also the 11th consecutive negative day for the index, the longest losing streak in more than 25 years.
"People are certainly nervous about a potential recession in the US spilling over to the rest of the world," said David Cohen at Action Economics."People are certainly nervous about a potential recession in the US spilling over to the rest of the world," said David Cohen at Action Economics.
So far this year, Japan's Nikkei has dropped 13% percent, the Hang Seng is down more than 14%, and China's main Shanghai index has slipped almost 7%. So far this year, Japan's Nikkei has dropped 13%, the Hang Seng is down more than 14% and China's main Shanghai index has slipped almost 7%.