Global markets falter on fear over US financial crisis

LONDON, July 16, 2008 (AFP) – World stock markets struggled on Wednesday after sharp losses driven by the unfolding US financial crisis and before more testimony from US Federal Reserve chief Ben Bernanke, dealers said.

Bernanke warned of economic gloom on Tuesday and his next comments are awaited anxiously by investors, reeling from the collapse of US bank IndyMac and a rescue for US mortgage-financing firms Fannie Mae and Freddie Mac.

Markets are worried that the deep strains in US finance could spread overseas since foreign investors have large exposure to American home loans, dealers said.

“Goaded by bearish analysts, investors seem to be abandoning American banks in droves,” the New York Times reported on Wednesday.

“While a fraction of the nation’s banks are expected to buckle under their growing burden of bad loans, federal regulators, bank executives and analysts agree that the vast majority of institutions are sound.”

In Europe on Wednesday, London shares fell by 0.27 percent after slumping on Tuesday to the lowest close since October 2005. Elsewhere, Paris shed 0.17 percent, while Frankfurt gained a marginal 0.03 percent.

In Asia the picture was also subdued as some investors hunt