US woes add to chill wind spreading across world markets

Published on Friday 2 March 2007 00:07

INVESTORS will be looking for stability today, after world shares dropped for a third day on concerns about economic growth and the outlook for corporate profits.

A large slide in Europe and Asia was compounded by a drop on US markets.

The FTSE 100 index closed 0.9 per cent lower, or 55.5 points, at 6,116. It has now shed 5 per cent in three days, wiping more than 80 billion off its value.

The global sell-off was triggered by fears of a new tax in China on Tuesday, and has now spread to wider issues. Last night, Germany's Dax and France's Cac had both fallen another 1.1 per cent. Earlier in the day, Japan's Nikkei 225 index had closed 0.9 per cent lower, while Hong Kong's Hang Seng slipped 1.6 per cent.

Shares fell 9 per cent in Shanghai on Tuesday, their biggest daily reverse in ten years, and dropped a further 87.99 points yesterday, closing 2.9 per cent lower.

Since Tuesday, investors have now swung their concern to the state of the US economy and strength of the mortgage market there. On Wednesday, figures from the US commerce department showed that the US economy grew at a slower-than-expected 2.2 per cent in Q4 2006.

Other figures showed that spending on new home building fell 19.1 per cent during the quarter, the sharpest drop since early 1991, adding to worries over the state of the housing market in the world's largest economy.

Last May, the UK's FTSE lost more than 9 per cent in three weeks, before recovering and surging to its highest level in more than six years last month.

markets, page 42