LONDON (AFP) – European equities dived on Monday after heavy falls earlier in Asia as markets were gripped by growing concern that the US economy was slipping into recession, dealers said.
Stock markets inand the United States had sunk late last week following signs that the fallout from the US credit crisis was far from over.
In late morning European trade on Monday,, and Paris stock markets chalked up fresh losses of about 1.5 percent.
Asian stocks plunged earlier Monday withending down almost 4.5 percent, tumbled 3.07 percent and gave up 2.3 percent. and Sydney both shed about 3.0 percent.
“Not a great start to the week with thefollowing falls in the US Friday and Asia today,” said Mike Lenhoff, strategist at brokerage Brewin Dolphin.
“What matters most to investors is what is happening in the US. Investors view the US as in recession or going into recession which is not good news for corporate earnings and the market.”
London’s FTSE 100 index of top companies shed 1.32 percent to 5,806.70 points. Frankfurt’s DAX 30 slid 1.51 percent to 6,646.08 points and the Parislost 1.33 percent to 4,727.09.
In the, the euro stood at 1.5174 dollars, after striking a record high 1.5239 last Friday.
The European banking sector took a big hit amid fresh credit crunch fears, with giant HSBC announcing more than 17 billion dollars in losses linked to the US housing sector in 2007.
The bank still managed to post a record net profit but this was largely due to its historic core business in Asia.
“As ongoing worries over US growth and the problems in credit markets continue, risk-taking is likely to continue to be scaled back” in, said ABN Amro analyst Melinda Smith.
Among global stock markets, Tokyo was the hardest hit, with thetumbling 4.49 percent to end below the key 13,000 points level for the first time in over a month.
The heavy losses also came as the yen soared to a fresh three-year high against the ailing dollar, stoking worries about the outlook for Japanese exporter earnings.
Worries about the fallout from the US subprime home loan crisis escalated after a weak earnings report from insurer American International Group (AIG), which wrote down 11.1 billion dollars in credit-related losses.
The results were “a reminder to investors that subprime woes have not gone away,” CIMB-GK Research analyst Song Seng Wun wrote in a note to clients from.
In, worries about the state of the local economy added to the pessimistic mood.
Stocks fell heavily onon Friday, hit by weak earnings news and growing fears that the US economy may be slipping into recession, dealers said.
Theplunged 2.51 percent Friday while the tech-heavy Nasdaq skidded 2.58 percent to a 17-month low.
Investors were spooked by a media report that a planned bailout of US bond insurer Ambac Financial was running into snags, dealers said.
Ambac and other major bond insurers have been hard hit in the financial turmoil stemming from theand related credit squeeze.
“Investor fears of a US recession have strengthened. There is even a growing view that the US economy has already entered into a recession,” said Ryohei Muramatsu of Commerzbank in.
A Commerce Department report showed Friday that US consumer spending increased 0.4 percent last month while personal income rose 0.3 percent.
While both readings were better than anticipated, economists said the survey also suggested American wallets are being increasingly stretched by inflation.
Markets expect the US central bank to cut interest rates again at a March 18 meeting. The central bank has already slashed borrowing costs by 2.25 percentage points since September in a bid to shore up flagging economic growth.
Mon Mar 3, 7:38 AM ETSource: Yahoo News