Global stocks see sharp declines

Wall Street losses prompted a broad sell-off in Asian markets

bbc news
European shares were down sharply in late afternoon trading, mirroring earlier falls in East Asia as worries about the US economy continue.

The UK's FTSE 100 index was 1% lower at 6,464 by late afternoon in London, while Germany's Dax had lost 1.2%, and France's Cac had shed 1.7%.

And on Wall Street, the Dow Jones index lost ground - extending Friday's heavy fall which first prompted the slumps.

Earlier, Tokyo's Nikkei index closed 2.2% lower.

Caterpillar warning

The Dow Jones, the main US share index, fell 367 points on Friday, the 20th anniversary of the Black Monday stock market crash.

And it had lost another 80 points in the first hour of Monday trading, though the tech-heavy Nasdaq index was 0.1% ahead.

Friday's slump on Wall Street is going to dominate market sentiment as the new trading week gets under way Matt Buckland, a trader with CMC Markets Q&A: What's troubling the markets?

US falls were triggered by concerns that the full effects of the housing slowdown had not yet been seen.

It started when the building equipment firm Caterpillar cut its profit forecast, blaming the state of the economy.

Caterpillar added that the US economy would be "near to, or even in, recession" next year.

'Sentiment driven'

"Friday's slump on Wall Street is going to dominate market sentiment as the new trading week gets under way," said Matt Buckland, a trader in London with CMC Markets.

"Obviously there's speculation that we may see a repeat of the losses from Black Monday some 20 years ago, and with little economic data being scheduled for release, it's going to be sentiment rather than the fundamentals that provide the bulk of the direction."

On Black Monday in 1987, the Dow Jones fell 23%, which nowadays would mean a drop of more than 3,000 points.

The fall on the FTSE 100 comes after it had recovered from the panic that gripped markets in August in the wake of the global credit squeeze.

Last month the US Federal Reserve slashed interest rates from 5.25% to 4.75%, making borrowing cheaper, in a bid to encourage more consumer spending and corporate activity.

And some believe that polic ymakers will reduce rates again when they meet next week.