Economy worries hit global shares

Global stocks have fallen sharply on fears the global financial sector could take a further turn for the worse.

• In Europe, the UK’s FTSE 100 fell by 4.2%, while Germany’s Dax was down 2.8% and France’s Cac 40 lost 3.6%.
• Earlier in Asia, Japan’s Nikkei index closed down 3.8% at 7,280.15, and Hong Kong’s Hang Seng index fell 3.9%.
• Confidence was hit by a fresh $30bn bail-out of US insurance giant AIG, and news that UK bank HSBC aimed to raise £12.5bn from its shareholders.
• HSBC, Europe’s biggest bank, said it would use the money raised from the rights issue to help the bank cope with the effects of the global economic downturn.
• The bank also said pre-tax profits for 2008 were $9.3bn (£6.5bn), down 62% on the previous year after it wrote down the value of US assets by more than $10bn.
• “The big issue [for markets] is the fact that HSBC – one of the biggest and strongest banks around – is having such problems,” said Jonathan Jackson and Killik & Co.
• “It’s difficult to see any trigger for an upturn in the short term,” he added.
• Meanwhile, US insurance giant AIG announced a record corporate loss of $62bn in the fourth quarter.
• Weak manufacturing figures in both the UK and eurozone also placed downward pressure on European markets.
• The Purchasing Managers’ Index (PMI), compiled by research group Markit, showed that manufacturing activity fell in February compared with the previous month.
• “Once again, the extreme weakness in manufacturing activity in February was widespread across the eurozone, with all countries seeing a very sharp contraction in activity,” said Howard Archer at IHS Global Insight.
• The figures were particularly badly received because manufacturing activity in both the UK and the eurozone rose slightly in January.
• In Asia, weak economic data from China and South Korea underscored fears about the region’s export-dependent economies.
• China’s manufacturing sector declined further last month, while South Korean imports and exports also slumped. Japan reported a steep drop in car sales.
• Monday’s shares slide followed a poor performance on Wall Street on Friday after data showed that US economic growth was even weaker than thought.
• “The Tokyo market is being hit directly by the lower share prices overseas,” said Toshihiko Matsuno, research head at SMBC Friend Securities.
• John Mar, co-head of sales trading at Daiwa Securities SMBC Co. said: “You’re seeing the US is sinking lower and lower, and we’re still desperately searching for a bottom.”