Global stock markets dived for the second day in a row on Friday, 10 August, with Asian and European traders dumping shares over fears of a widening crisis caused by the US subprime housing sector. European markets opened about 2% lower, after Asian markets all closed down by between 2-4%. Analysts said investors were alarmed by signs that losses in the US subprime mortgage market, high-risk property loans to which many US banks and investment funds are exposed, was spreading to other regions.
BNP Paribas, France’s biggest bank, spooked the market on Thursday when it said it had suspended three investment funds exposed to the US housing market because it was unable to value the assets. News that the US, Eurozone, Japanese and other central banks had pumped massive amounts of cash into the banking sector to forestall a lack of liquidity appeared to add to the sense of nervousness on global markets.
On Asia’s largest market in Tokyo, the benchmark Nikkei-225 index slumped by as much as 3% at one point before ending down 406.51 points or 2.37% at 16,764.09, the lowest closing level for almost five months. Seoul ended down 4.2%, Sydney slumped 3.7%, Hong Kong slid 2.88%, Mumbai was down 2.65%, Singapore gave up 3.31% and Taipei lost 2.74%. In Europe in early morning trade, the FTSE 100 in London fell 1.74% to 6,162.00, in Frankfurt the DAX was down 2.04% at 7,301.22 and the Paris CAC 40 shed 1.89% to 5,515.42. Wall Street lost nearly 3% overnight. The overriding fear of investors is that banks will tighten their borrowing terms in response to the subprime crisis to prevent further exposure and cover losses already incurred.
