World stocks sink on fresh sub-prime fears*

 From correspondents in New York

August 29, 2007 07:50am
Article from: Agence France-Presse

GLOBAL stock markets saw dizzying declines overnight as a drop in US
consumer confidence suggested slow growth ahead and Federal Reserve
comments hinted at deeper-than-expected housing market woes.

Wall Street losses accelerated late in the day, driving the main US
share indexes down over two per cent, while European shares suffered
steep losses earlier.

Jitters resurfaced as the Conference Board, a business research group,
said its consumer confidence index fell to 105.0 in August from 111.9 in
July.

The group attributed the decline to "softening'' business and labor
market conditions and financial market turmoil.

But the market action turned ugly after minutes released by the Federal
Reserve from its August 7 meeting said the US housing meltdown "could
well prove to be both deeper and more prolonged than had seemed likely
earlier this year,'' and that a "policy response'' or rate move, might
be needed.

Marc Pado, market strategist at Cantor Fitzgerald, said the market was
worried that the Fed may have been less than fully candid in its
original statement earlier this month.

"The Fed is supposed to have been more transparent, more willing to be
honest about its opinion'' about the state of the economy, Pado said.

"The minutes released didn't offer any surprises, but it did rekindle
some of the nerves,'' added Carley Garner at Alaron Trading.

"Inflation remains a predominant concern of the Fed's. The fight between
liquidity, growth and inflation may leave the Fed with its hands tied
behind its back.''

In New York, the Dow Jones Industrial Average plunged 2.10 per cent to
13,041.45 and the Nasdaq sank 2.37 per cent to 2500.64. The broad-market
Standard & Poor's 500 market retreated 2.35 per cent to 1432.36.

Meanwhile one measurement for the ailing US housing industry showed
prices continuing to fall.

The S&P/Case-Shiller national home price index fell 0.9 per cent over
the past month and 3.2 per cent from the second quarter, its steepest
drop in 20 years.

At Seven Investment Management, director Justin Urquhart Stewart warned
of further volatility until the full extent of the meltdown in the US
high-risk mortgage sector, also known as the subprime market, was known.

The stock market "cannot start to get any composure until we can find
out how much damage it has done,'' Stewart said.

Dendra Lambert at Hilliard Lyons said ``credit concerns resurfaced''
early in the day, keeping the financial sector under pressure.

She said a report that State Street Corp. had $US22 billion ($27
billion) in exposure to asset-backed commercial paper raised more fears
for the sector. Merrill Lynch meanwhile lowered its ratings on Lehman
Brothers, Bear Stearns and Citigroup due to exposure to the debt markets.

In London, the FTSE slid 1.90 per cent to 6,102.20 while in Paris the
CAC 40 gave up 2.08 per cent to 5474.17.

In Frankfurt the DAX lost a more modest 0.74 per cent to 7430.24.

In other markets, the Bovespa in Brazil slid 2.7 per cent and Mexico's
Bolsa lost 3.13 per cent. Toronto's S&P/TSX index lost 1.65 per cent.

Yesterday, many Asian markets eased back as investors took a breather
from recent choppy trading, with Hong Kong's Hang Seng index losing 0.91
per cent to 23,363.76.

In Tokyo the Nikkei index was off by a slight 0.09 per cent at 16,287.49.

Shanghai managed to hit another record high however, on strong company
earnings reports that pushed the overall market up by 0.87 per cent to
5,194.69.