Heavy losses sweep world stock markets
Pastor Dale Morgan
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*Heavy losses sweep world stock markets*
London's FTSE 100 fell below the 6,000 level on Thursday as uncertainty
over the impact of losses in the US sub-prime lending market persisted.
The index of leading UK shares lost 2.1% to 5983.3 points by 0920BST 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.
Japan's Nikkei index lost 2%, with shares down 3.7% in Hong Kong.
France's Cac-40 index was 2.2% lower while Germany's Dax-30 opened down 1.8%
The FTSE has not fallen below 6,000 during a trading session since March
this year. It last closed below 6,000 in October 2006.
The problems in the sub-prime mortgage market will linger on for a while
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 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.
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.
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.
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.
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 3.7% of its value.
Credit 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.
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.
"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."
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.