Stumble Upon

del.icio.us

Digg

Facebook

Print

Email

Speak Up

LONDON - European and most Asian stock markets fell Tuesday, hit with renewed fears over U.S. credit problems and their impact on financial companies after overnight weakness on Wall Street.

Britain's FTSE 100 share index fell more than 2 per cent, with every blue-chip stock on the list starting the day in negative territory, before climbing back up to 5,450.50 by afternoon in Europe, still down 1.13 per cent on Monday's close.

Elsewhere in Europe, Germany's DAX fell 1.60 per cent to 6,293.33 and France's CAC dropped 1.84 per cent to 4,262.88.

In Asia, Japanese shares dropped to their lowest level in nearly three months. Hong Kong, Taiwan, India and South Korea stocks also declined, while mainland China's markets climbed.

Investors were jittery despite lower oil prices after shares of U.S. mortgage purchasers Fannie Mae and Freddie Mac tumbled in New York following a Federal Reserve official's warning that housing market problems would likely extend into next year. The two institutions were also pulled lower after Lehman Brothers analysts said accounting changes could leave them short of capital reserves.

In the UK, concern about continued weakness in the British economy helped push the FTSE briefly into bear territory.

Persimmon PLC, the nation's No. 2 homebuilder, announced that it was laying off 1,100 employees to cope with a sharp drop in the housing market which had cut its sales in the first half by about a third.

Shortly after opening, the index was more than 20 per cent down from its 52-week of high of 6,754.10, and 22 per cent below its all-time high of 6,930.2 from Dec. 30, 1999. A fall of 20 per cent is a common definition of a bear market.

In Japan, the benchmark Nikkei 225 Stock Average slid 2.5 per cent, to 13,033.10 - its lowest close since April 16. Securities, mining, banking and consumer finance issues all suffered.

Sumitomo Mitsui Financial Group, Inc. and Resona Holdings, Inc. both plunged 4.1 per cent. Nomura Holdings Inc., Japan's biggest broker, retreated 4.6 per cent.

Japanese exporters succumbed to a weakening dollar, which traded at 106.34 yen late afternoon Tuesday, down from 107.14 yen Monday in New York. A stronger yen reduces the value of sales repatriated from abroad.

Toyota Motor Corp. dropped 1.2 per cent; Sony was off 4.1 per cent.

In Hong Kong, the blue-chip Hang Seng Index lost 3.2 per cent to close at 21,220.81 as traders reacted to the U.S. market's performance and regional declines. Aluminum Corp. of China, or Chalco, shed 5.6 amid reports that it may see lower output at two mainland plants.

Oil companies were off. China Petroleum & Chemical Corp., or Sinopec, fell 2.7 per cent despite lower crude prices, which help the refiner's margins. Upstream oil producer CNOOC lost 3.4 per cent.

In other markets, Taiwan's main stock benchmark plummeted nearly 4 per cent, weighed down by losses in the financial sector. In India, the main Sensex index fell 1.3 per cent.

Bucking the trend, China's shares rose for a second day, with news that the government was postponing a resource tax, lifting coal producers. Hopes for an Olympics-led tourism boost pushed up airline stocks. The benchmark Shanghai Composite Index rose 0.8 per cent to 2,814.95 points.

Shares in midsize producer Anhui Hengyang Coal Ltd. rose by the full daily limit of 10 per cent. China Shenhua Energy Corp., China's biggest coal producer, rose 3 per cent.

Airlines also were higher, adding to recent gains on investor expectations of strong tourism growth for August's Beijing Olympics. Air China Ltd., the country's No. 2 carrier by passenger numbers, rose 6.8 per cent. Industry leader China Southern Airlines Corp. rose 2.2 per cent.

The main Shanghai index has gained 6.1 per cent since hitting a 16-month low of 2,651.6 on July 1. But it is still off 54 per cent from its all-time high of 6,092.06 points on Oct. 16.

-

AP Business Writer Jeremiah Marquez contributed to this report from Hong Kong.