Jitters return as world stocks slide.

Provided by 7DAYS.ae

Asian stocks tumbled yesterday followed by losses across European markets on concern over company earnings and increasing gloom about prospects for the global economy, analysts said. "Another nervous week [lies] ahead as the US earnings season unfolds and key financial names such as Citigroup and Merrill Lynch are expected to announce important restructuring measures," said Commerzbank analyst Luis Costa.

He added that a busy earnings calendar in a week full of economic indicators was "a good scenario for more volatility" on equity markets. Wall Street ended lower on Friday after a weak earnings report from US giant General Electric, heightening fears of contagion from economic and credit market turmoil.

Many Asian investors, nervous about the news from the US, offloaded their stocks yesterday. Shanghai was particularly badly hit, plunging 5.62 per cent ahead of upcoming growth and inflation figures. Investors were also spooked by rumours of possible government controls on speculative property investment, dealers said.

Tokyo slid 3.05 per cent, while Seoul closed 1.9 per cent lower and Sydney gave up 1.8 per cent. Hong Kong closed down 3.5 per cent as Singapore lost 2.3 per cent. Dealers took their cue from New York where the Dow Jones Industrial Average fell more than 250 points on Friday after General Electric said its profits were hit by the credit market turmoil and downgraded its outlook.

"Concerns about US corporate earnings are increasing as companies may lower their profit forecasts," said Maki Shimizu, an analyst at UBS Securities. GE's surprise announcement refocused attention on the financial sector ahead of the release this week of earnings from a raft of big players, including JP Morgan Chase and Washington Mutual.

"Earnings forecasts for GE are usually spot-on so this was a big shock," said Ric Klusman, head of institutional trading at Aequs Securities in Sydney. In early European trade yesterday, London's FTSE 100 index of leading shares lost 0.41 per cent in value to 5,871.30 points. Frankfurt's DAX 30 shed 0.57 per cent to 6,566.03 points and in Paris, the CAC 40 declined by 0.41 per cent to 5,871.30.

Ministers from the Group of Seven rich countries ended a weekend summit with a communique that expressed concern about the global economic slowdown and credit crunch but outlined few concrete measures to tackle it. Instead the finance chiefs from Britain, Canada, France, Germany, Italy, Japan and the US backed proposals to improve banking transparency and accounting to try to prevent a repeat of the worst financial crisis in decades.

"The G7 worked out measures that may contribute to the medium-term stability of the credit markets, but failed to offer anything that would have short-term effects," said Shinko Securities market analyst Yutaka Miura. Stocks were also hit by a weaker-than-expected reading showing US consumer confidence at a 26-year low.

"The extremely poor consumer confidence reading may add to worries about stagflation," said Yoshikiyo Shimamine, chief economist at Dai-Ichi Life Research Institute. Stagflation sets in when prices increase in the absence of economic growth.

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