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World Markets Fall Again on Loan Worries - ASHARQ AL-AWSAT English Archive
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LONDON, (AP) -Global stock markets tumbled again Thursday, battered by persistent worries about U.S. housing loan problems and potential damage to the global economy.

The slides came despite moves by the U.S. Federal Reserve to add more cash to the U.S. banking system on Wednesday and action by other central banks since last week that still failed to calm investors’ nerves.

In London the FTSE 100 Index dropped 3.1 percent to 5,919.60, trading below the 6,000 level for the first time since March. About 108.9 billion pounds ($216.9 billion) has been wiped from the value of Britain’s leading stocks since trading closed last Wednesday.

France’s CAC-40 declined 2.8 percent to 5,289.21 after earlier dropping to its lowest level this year, and Germany’s DAX index fell 2.7 percent to 7,248.13.

“Europe has opened up with heavy losses this morning after yet more losses on Wall Street overnight,” said Scott Scrase, a trader at CMC Markets. “There could be further losses to come.”

In Asia, the benchmark Nikkei 225 index closed down nearly 2 percent on the Tokyo Stock Exchange after falling below the key 16,000-point mark the first time since November. South Korea’s main benchmark fell 6.9 percent to its lowest finish since May, and Hong Kong’s blue chip Hang Seng Index dropped 3.3 percent to its lowest close in two months.

Before the market opened in the U.S., troubled mortgage lender Countrywide Financial Corp. revealed it would have to draw on a $11.5 billion credit facility to fund its operations with money increasingly hard to come by in tightening credit markets.

The New York Fed, which carries out the U.S. central bank’s market operation, said Thursday it would step in with a 14-day repurchase agreement. On Wednesday, the Fed accepted a “repo” of $7 billion, in which it buys that amount in securities from dealers, who then deposit the money into commercial banks.

Central banks around the world have been supplying billions of funds to banks in the past week to make cash available for lending and keep interest rates from rising amid signs that credit was drying up.

Repercussions from the U.S. credit crisis rippled across Asia, where at least three markets lost more than 6 percent on the day.

That’s because of uncertainty over the size of impact on corporate earnings and the regional economy, said Shinichi Ichikawa, chief strategist at Credit Suisse. He said the weakness of the dollar and the euro also fueled the concerns.

“The issue of the subprime loans is not just the problem of that sector but it also affects many related financial products, (and) the size of a possible damage or other details are not clear, and that’s why investors are feeling uneasy,” Ichikawa said.

On Wednesday in the U.S. the Dow Jones industrial average fell 1.29 percent to 12,861.47, closing below 13,000 for the first time since April 24. U.S. stocks appeared headed for another sharp retrenchment Thursday as fears persisted of widening problems with some mortgages and tighter access to credit.

“All of Asia and other European markets are watching the U.S. market,” said James Soh, a strategist at Korea Investment & Securities Co. in Seoul. Global investors were focused in particular on the U.S. Federal Reserve, he said.

Some investors have been calling for the U.S. central bank to free up more cash by making an interest rate cut at its Sept. 18 meeting.

The Bank of Japan injected 400 billion yen ($3.4 billion) into money markets Thursday, the third time since last Friday it has acted in a bid to curb rises in a key overnight interest rate.

Despite the move, banking issues took a beating due to the global credit concerns.

Asharq Al-Awsat

Asharq Al-Awsat

Asharq Al-Awsat is the world’s premier pan-Arab daily newspaper, printed simultaneously each day on four continents in 14 cities. Launched in London in 1978, Asharq Al-Awsat has established itself as the decisive publication on pan-Arab and international affairs, offering its readers in-depth analysis and exclusive editorials, as well as the most comprehensive coverage of the entire Arab world.

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