Global stocks dive on scepticism over US mortgage rescues
World equity markets and the dollar fell heavily on Tuesday on scepticism that a dramatic weekend US government rescue of two mortgage giants would contain crisis in American finance, analysts said.
European equities sank after more steep losses on Wall Street and in Asia, despite an exceptional US rescue on Sunday to increase credit lines for Fannie Mae and Freddie Mac, and amid the failure of IndyMac bank in California.
"The euphoria following the weekend announcements in support of the US agencies has faded very quickly and as a result risk aversion is higher and equities are lower," said Calyon analyst Mitul Kotecha on Tuesday.
"Asian equities slumped following disclosures by many banks of bond holdings in US agencies, with financials leading the move lower.
"Concerns in the US as to whether more banks are going to collapse has added to the market malaise which must have left policy makers in a sense of bewilderment given the short-lived bounce in sentiment."
In late morning deals, London lost 1.53 percent, Frankfurt fell 2.04 percent and Paris dropped 1.42 percent. Madrid slumped 3.01 percent, Amsterdam was down 2.48 percent and Zurich dipped 1.80 percent.
In Asia, Hong Kong plunged 3.8 percent, Tokyo tumbled by almost two percent to reach a three-month low point, Sydney sank by 2.1 percent and Mumbai closed down 4.91 percent at a new low for the year.