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Stock markets go into freefall

HONG KONG, China (CNN) — Share markets across Europe and Asia plunged for a second day Tuesday as global markets reacted to fears that a U.S. economic slowdown will lead to a global recession.

In early trading, London’s FTSE 100 was down 3.30 percent, Paris’ CAC 40 fell 4.15 percent and Germany’s DAX 30 dropped 4.50 percent.

Japan’s Nikkei 225 index slid 5.65 percent to close at 12,573.05 on the Tokyo Stock Exchange.

Australia’s benchmark SP/ASX200 index closed down 7.1 percent at 5,186.8 — the biggest one-day loss for almost 20 years.

The benchmark Shanghai Composite Index closed down 7.2 percent at 4,559.75.

India’s Sensex index plunged 10 percent after resuming trade when an automatic shutdown was triggered by an 9.75 percent slump at the opening. Shares on the Sensex had fallen nearly 11 percent — a four-month low — on Monday.

South Korean shares fell sharply before the Korea Composite Stock Price Index recovered slightly to finish the session down 4.4 percent at 1609.02, having slid as much as 6.3 percent during the day.

Indonesia’s market, meanwhile, was down 10 percent and Hong Kong’s Hang Seng index dropped 2,061.23 points, or 8.7 percent, to 21,757.63.

The Singapore stock exchange was down 4.5 percent, and Taiwan’s benchmark Taiex was down 6.6 per cent during trading.

Europe’s main three indices, the FT-100 in London, the CAC 40 in Paris and the DAX in Frankfurt fell between 5 and 7 percent on Monday.

I think a lot of people had been hoping that when the new year started that we would find that the U.S. housing market’s problems were largely isolated to that market, said Royal Bank of Scotland’s Kit Jukes. Every piece of news we’ve had since Christmas has argued against that position.

Traders said steps announced last week by President Bush to kick-start the U.S. economy are too little too late. They got no direction from New York, because U.S. markets were closed for the Martin Luther King Jr. holiday.

Traders now want to see how Wall Street reacts when it reopens Tuesday.

I think the expectation is the U.S. will open further down tomorrow, said analyst Howard Wheeldon of BGC Partners. That is a big kick in the teeth for President George W. Bush.

Markets also plunged across South America, where the United States is the largest trading partner for many economies. Brazil’s Bovespa exchange, the continent’s largest, closed down 6.6 percent, Argentina’s Merval dropped 6.3 percent, Colombia’s IGBC was down 7.7 percent and Peru’s General Index was off 8.4 percent.

In North America, the Toronto stock exchange fell 4.75 percent, while Mexico City closed down 5.35 percent.

If the United States slips into recession, Americans may buy fewer goods, especially those from overseas. That’s why shares from Toyota in Tokyo to BMW in Frankfurt were down heavily.

Banks also fell hard as the lending policy during the boom time continues to concern analysts. Banks and insurance companies also own a lot of equities.

Commodity-led shares, like oil firms and mining companies, were also hit hard, after flying high for most of 2007. If the world economy falters consumers are likely to less oil and buy fewer products like gold and copper.

By only the 14th trading day of 2008, shares in Europe’s main markets are now down between 12 to 15 percent on the year.

During the market gyrations of 2007, sharp falls were often followed by sharp rises. There is no evidence of that yet in 2008. E-mail to a friend

CNN’s Espanol’s Gabriela Frias contributed to this report.

Copyright 2008 CNN. All rights reserved.This material may not be published, broadcast, rewritten, or redistributed. Associated Press contributed to this report.

Stock markets go into freefall – found here.

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January 22, 2008 - Posted by | Uncategorized

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