World stocks plunge on fears on US recession

Monday, January 21, 2008

Stock prices dropped sharply in Europe and Asia Monday, with fears of economic problems in the United States causing some of the biggest single-day losses in recent years.

In Hong Kong, the Hang Seng index fell 5.5 percent – its biggest fall since the September 11, 2001, terrorist attacks. Losses of between three and seven percent were recorded in India, China, Britain, France, Germany and Canada.

While there are many factors linking national economies, analysts blame recent losses on fears of a recession in the United States.

The United States is the main export market for many overseas businesses. Foreign investors also have bought large stakes in U.S. companies.

When American home loan companies began reporting large numbers of defaulting loans in late 2007, the losses spread to other financial institutions, tightening credit markets and sparking worries about Americans’ high levels of debt.

Last week, President Bush proposed a $145 billion stimulus plan to encourage more consumer spending. But analysts say the measure may not be able to prevent a recession – defined as a broad decline in a nation’s economy over a period of at least six months.

U.S. markets are closed on Monday for Martin Luther King Jr. Day, a national holiday, but stock futures trading indicates further losses are expected when markets reopen Tuesday.