Global stocks plunge on weak US economy

LONDON (AFP) — Stock markets tumbled across Asia and slid in Europe Thursday after heavy losses on Wall Street on concerns over the global credit squeeze, a weak dollar and soaring oil prices, dealers said.

Investors trading on European indices were also nervous ahead of interest rate calls from the European Central Bank and Bank of England due Thursday.

The Paris CAC 40 lost more than one percent in morning trade after Japanese share prices closed down two percent at a two-month low.

Wall Street stocks dived almost three percent on Wednesday, as investor sentiment was also hit by a colossal earnings loss by auto giant General Motors.

“The plunge in global equity markets has ensured that the climate of fear and uncertainty persists with GM the latest casualty to suffer huge losses related to the decline in value of mortgage-related securities held by its part-owned financial arm and weak auto sales,” said Derek Halpenny, an economist for The Bank of Tokyo-Mitsubishi in London.

General Motors on Wednesday posted a record loss of $39 billion (26.6 billion euros) for the third quarter on a massive accounting charge.

“Shares are following Wall Street lower amid heightened fears of a credit crunch,” said Hirokazu Fujiki, equity strategist at Okasan Securities.

“The market does not know the extent of the fallout (from recent credit market turmoil),” Fujiki said. “That’s why it is scared.”

Investors fear that major banks will be forced to book larger losses than previously thought on securities backed by subprime mortgages to homebuyers with patchy credit histories.

In European stock trading meanwhile, the Paris CAC 40 shed 1.17 percent to 5,616.97 points early on. London’s FTSE 100 index of leading companies fell 0.81 percent to 6,333.60 points and in Frankfurt the DAX 30 lost 0.37 percent to 7,770.76.

The European single currency stood at 1.4668 dollars after hitting a record high 1.4731 on Wednesday.

Global stocks are also hurting from the dollar’s slide against the euro. The strength of the European single currency is hindering exporters whose goods are priced in the euro and are thus more expensive for importers buying in dollars.

The weak dollar, meanwhile, has led one Chinese official to suggest that China may decide to diversify its massive foreign exchange reserves away from the US unit.