World stocks track Wall Street lower

[July 29, 2008]  LONDON (AP) -- European and Asian markets fell Tuesday on Wall Street's weakness, with anxiety over U.S. housing and financial sectors deepening after investment bank Merrill Lynch & Co. announced a $5.7 billion loss from bad debt. A disappointing Toyota Motor Corp. forecast also weighed on Japanese shares.

In Tokyo, the Nikkei 225 lost 1.5 percent to close at 13,159.45 points, and every major benchmark in the region closed down. In morning trading in Europe, Britain's FTSE 100 fell 0.48 percent to 5,287.30, Germany's DAX was down 1.21 percent at 6,274.39 and France's CAC 40 lost 1.53 percent at 4,258.24.

Throughout Asia, investors were distressed after Wall Street fell back into bear territory overnight, hit with more worries that decaying U.S. housing and credit markets will cause the world's largest economy -- a major importer of Asian-made goods -- to slow.

The International Monetary Fund added to some of those fears with a report saying that "a bottom for the (American) housing market is not visible." And Merrill Lynch's massive write-down, booked from selling off risky mortgage securities and hedging contracts, was yet more evidence of financial troubles.

There were also problems closer to home. Merrill's news came a day after Australia & New Zealand Banking Group Ltd., the country's fourth-largest bank, announced a 1.2 billion Australian dollars ($1.1 billion) provision charge for bad debts and other write-offs.

"The credit crunch is still biting," said Garry Evans, pan-Asian equity strategist with HSBC in Hong Kong. "That raises risk aversion and worries of a sharp slowdown in the U.S."

Hong Kong's blue-chip Hang Sang Index shed 1.9 percent to 22,258, posting its fourth straight day of losses. Indian and Taiwan measures tanked 4 and 3 percent, respectively. And Shanghai, South Korea, Australia markets were off just under 2 percent.

In Japan, the market swooned after Toyota said Monday that it was lowering its global vehicle sales plan for this year to 9.5 million vehicles -- down from 9.85 million -- as the sluggish North American market slows the Japanese automaker's momentum. Toyota fell 2.7 percent in Tuesday trade, with its rival Honda Motor Co. declining 2.2 percent.

Investors in Japan largely stayed on the sidelines ahead of the release of earnings results from major Japanese companies during the week, analysts said.

After the market's close, Sony Corp. reported a 50 percent plunge in April-June profit, due partly to a stronger yen that eroded sales. The electronics and entertainment company shed 3.2 percent before the announcement.

In Hong Kong, banks, airlines and exporters saw heavy selling. Financials issues such as Standard Chartered, down 4.4 percent, and HSBC, off 3 percent, were beaten down on souring sentiment about the sector. Companies dependent on overseas markets lost ground as investors worried about U.S. demand, with Retail goods and textile exporter Li & Fung plummeting 5.4 percent.Mainland China investors were left skittish by Wall Street's performance. The benchmark Shanghai Composite Index fell 1.8 percent to 2,850.31. The Shenzhen Composite Index lost 1.5 percent to 855.84.

News of plans by China Nanche Corp., a state-owned locomotive manufacturer, for an initial public offering early next month also cast a pall on buyers.

Major IPOs and an influx of previously nontradable shares into the market remain chronic concerns for Chinese investors who fear that a surge in the supply of shares could overwhelm demand, pushing prices lower.

Large capital shares led the decline. Baoshan Iron & Steel Corp. fell 4.3 percent, Industrial & Commercial Bank of China dropped 2.3 percent, and China Life Insurance sank 3 percent.

[Associated Press; By LOUISE WATT]

AP Business Writer Jeremiah Marquez contributed to this report from Hong Kong.

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