Fears about an economic slowdown in the U.S. and the end of the Chinese economic bubble sparked a global wave of selling causing world stock markets to plunge on Feb. 26. Asia was dragged down by a plummeting Shanghai stock market, Wall Street slumped, and the main European indices showed falls of between 2%-3% on average at the close.
Metal and mining stocks were particularly hard hit because of concerns about demand from China, which has been the driving force behind record prices for raw materials in recent years.
In London, the FTSE 100 lost 2.31% to close at 6,286.10 points, in Paris the CAC 40 shed 3.02% to 5,588.39 points while in Frankfurt the DAX fell 2.96% to 6,819.65 points.
In the U.S,. the Dow Jones Industrial Average was down 415.46 points and closed at 12,216.90, while the tech-dominated Nasdaq composite tumbled 96.65. The broad-market Standard and Poor's 500 index dropped 364.35 points to close at 1,399.30.
Earlier in Asia, the Shanghai stock market's composite index had closed down 8.84% -- the biggest one-day fall in 10 years. The fall in the Chinese stock exchange followed a switch in sentiment, with investors appearing to finally heed warnings from regulators that stock prices were vastly overvalued.
Tokyo's Nikkei-225 index of leading shares fell 0.52% to 18,119.92 points, snapping a three-day winning streak. Hong Kong's key Hang Seng Index closed down 1.76% at 20,147.87 points, dealers said.
Comments from former Federal Reserve chairman Alan Greenspan and rising tension about Iran's nuclear program also served to undermine investor confidence. Greenspan had warned on Feb. 26 that the economy had been expanding since 2001 and that there were signs that the current economic cycle was coming to an end.
In London, as well as concerns about the Chinese economy, mining shares were rocked by reports that the South African government was considering imposing a "windfall tax" on the resource industry. Xstrata plummeted 10.28% to 2,383 pence in London, BHP Billiton lost 6.16% to 1,051 pence and Anglo American shed 4.68% to 2,507 pence. In Paris steel maker Arcelor Mittal dropped 5.61% to 38.73 euros.
Geopolitical concerns also loomed large over global markets on Feb. 27 after two members of the U.S.-led coalition and a U.S. contractor died in a suicide blast on Feb. 27 outside an Afghan base where Vice President Dick Cheney spent the night.
Copyright Agence France-Presse, 2007