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Global Markets Tumble Again On Worries About Effects From Bad U.S. Loans

By TOBY ANDERSON
AP Business Writer

LONDON (AP) - Global stock markets tumbled again Thursday on persistent worries about U.S. housing loan problems and potential damage to the global economy.

The slides came even as the U.S. Federal Reserve dumped more cash into the U.S. banking system on Wednesday and Thursday, joining other central banks that have tried again and again to shore up investor confidence over the past week.

In London the FTSE 100 Index dropped 2.7 percent to 5,945.50, trading below the 6,000 level for the first time since March. About 108.9 billion pounds ($216.9 billion) has been wiped from the value of Britain's leading stocks since trading closed last Wednesday.

France's CAC-40 declined 2.1 percent to 5,237.34 after earlier dropping to its lowest level this year, and Germany's DAX index fell 1.7 percent to 7,319.56.

"Investors continue to flee from anything that smells of risk, even the tiniest bit," said Jay Bryson, global economist with Wachovia in Charlotte, North Carolina.

"There could be further losses to come," said Scott Scrase, a trader at CMC Markets.

The benchmark Nikkei 225 index closed down nearly 2 percent on the Tokyo Stock Exchange after falling below the key 16,000-point mark the first time since November. South Korea's main benchmark fell 6.9 percent, the greatest point drop ever, to record its lowest close since May. Hong Kong's blue chip Hang Seng Index dropped 3.3 percent to its lowest close in two months.

Brazil's main stock index on Sao Paulo's Bovespa exchange plunged 4 percent after the opening bell to 47,313, adding to a 3.2 percent drop a day earlier.

Before the market opened in the U.S., troubled mortgage lender Countrywide Financial Corp. revealed it would have to draw on an $11.5 billion credit line to fund its operations, with money increasingly hard to come by in tightening credit markets.

Also Thursday, the New York Fed, which carries out the central bank's market operation, injected $17 billion into the banking system in two operations. That infusion comes on the heels of a Wednesday "repo" of $7 billion, in which it buys that amount in securities from dealers, who then deposit the money into commercial banks.

Central banks around the world have been supplying billions of funds to banks in the past week to make cash available for lending and keep interest rates from rising amid signs that credit was drying up.

Repercussions from the U.S. credit crisis rippled across Asia, where at least three markets lost more than 6 percent on the day.

That's because of uncertainty over the size of impact on corporate earnings and the regional economy, said Shinichi Ichikawa, chief strategist at Credit Suisse. He said the weakness of the dollar and the euro also fueled the concerns.

"The issue of the subprime loans is not just the problem of that sector but it also affects many related financial products, (and) the size of a possible damage or other details are not clear, and that's why investors are feeling uneasy," Ichikawa said.

Stocks fell sharply Thursday in the U.S., with the Dow Jones industrial average down 0.6 percent to 12,785.38. The index had fallen more than 100 points within the first few minutes of trading, after closing below 13,000 on Wednesday for the first time since April 24. Broader stock indicators were also lower.

"All of Asia and other European markets are watching the U.S. market," said James Soh, a strategist at Korea Investment & Securities Co. in Seoul. Global investors were focused in particular on the U.S. Federal Reserve, he said.

Some investors have been calling for the U.S. central bank to free up more cash by making an interest rate cut at its Sept. 18 meeting.

The Bank of Japan injected 400 billion yen ($3.4 billion) into money markets Thursday, the third time since last Friday it has acted in a bid to curb rises in a key overnight interest rate.

Despite the move, banking issues took a beating on global credit concerns.

HSBC Holdings PLC, Europe's largest bank by market value, fell 2.2 percent in London. Man Group PLC, the world's largest publicly traded fund manager, dropped 7.9 percent, and Standard Chartered bank, which does much of its business in Asia, declined 6 percent.

Deutsche Bank fell 2.7 percent in Frankfurt while BNP Paribas - which last week froze three funds that had invested in the U.S. home loan market - was off 3.8 percent.

Metals futures also traded lower, with Rio Tinto down 4.8 percent, Xstrata off 5 percent, Kazakhmys falling 6.3 percent and Vedanta Resources declining 8 percent.

In Germany's export-driven economy, some big decliners were automaker DaimlerChrysler, down 4.6 percent, gas producer Linde AG falling 4.5 percent and tour package operator TUI AG off 6.3 percent.
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Associated Press Writers Mari Yamaguchi in Tokyo and Matt Moore
in Frankfurt, Germany, contributed to this report.

(Copyright 2007 by The Associated Press. All Rights Reserved.)


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