World stock markets fell today amid widening fears that a US plan to rescue financial companies from bad mortgage debt would do little to prevent a world economic slowdown. By afternoon in Europe, the UK's FTSE 100 had dived 2.65 per cent to 5,097.72, Germany's DAX tumbled 1.01 per cent to 6,045.96, and France's CAC-40 slid two per cent to 4,139.19. In Dublin, the financials-heavy Irish Stock Exchange plummeted eight per cent to 3,659, a nearly 12-year low.
The biggest fallers were Anglo-Irish Bank, down 17 per cent, and Bank of Ireland, down 14 per cent. Ireland's stock market has lost more than 60 per cent of its value and its bellwether bank stocks have lost roughly two-thirds of their market capitalisation over the past 12 months. In Asia, Hong Kong shares led the region's declines, with the blue-chip Hang Seng index losing 3.9 per cent to 18,872.85 points after two sessions of solid gains. In China, the benchmark Shanghai Composite Index declined 1.56 per cent to 2,201.51. Benchmarks in Australia and Singapore also were down sharply.
Investors were skittish after the Dow Jones tumbled 372.75 points, or 3.27 per cent, to 11,015.69, as Wall Street grew nervous about the government's plan to prop up the financial sector by buying hundreds of billions of dollars in banks' bad debts. Worries that the US$700 billion (Dh2.57 trillion) plan wouldn't be enough to forestall a recession in the US - a vital export market for Asia - weighed on the region's investors, analysts said. "Even if it does get approved, will this stabilise the financial markets? Will this be able to prevent the economy from further deteriorating? Investors aren't sure. We could face more tough times ahead," said Ernie Hon, an analyst from IDEA Securities in Hong Kong.
Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke, the architects of the $700bn bailout, were expected to face tough questions at a hearing later today from lawmakers about the eye-popping cost, how the rescue would work and how taxpayers would be affected. * AP