Global Stocks Dive on Skepticism over U.S. Mortgage Rescues

India's stock exchange dropped 4.9% while Madrid slumped 3%.

World equity markets and the dollar fell heavily on July 15 on skepticism that a dramatic weekend U.S. government rescue of two mortgage giants would contain crisis in American finance. European equities sank after more steep losses on Wall Street and in Asia, despite an exceptional rescue on July 14 to increase credit lines for Fannie Mae and Freddie Mac, and amid the failure of IndyMac bank in California.

In late morning deals, London lost 1.53%, Frankfurt fell 2.04% and Paris dropped 1.42%. Madrid slumped 3.01%, Amsterdam was down 2.48% and Zurich dipped 1.80%.

In Asia, Hong Kong plunged 3.8%, Tokyo tumbled by almost 2% to reach a three-month low point, Sydney sank by 2.1% and Mumbai closed down 4.91% at a new low for the year. Tapai dived 4.51%, Seoul shed 3.2% and Manila lost 1.79%, while Shanghai slumped by 3.43%.

Stocks in the Nordic region also fell across the board on, with Stockholm was down 1.6% in midmorning trading, while Helsinki 25 shed 1.34% and Copenhagen dropped 1.11%.

"The euphoria following the weekend announcements in support of the U.S. agencies has faded very quickly and as a result risk aversion is higher and equities are lower," said Calyon analyst Mitul Kotecha on July 15. "Asian equities slumped following disclosures by many banks of bond holdings in U.S. agencies, with financials leading the move lower. Concerns in the U.S. 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."

The dollar, meanwhile, plummeted to a fresh historic low against the European single currency. A strong euro, which hit a record high $1.6038 , makes eurozone exports more expensive for importers paying in dollars.

Copyright Agence France-Presse, 2008

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