World stocks in meltdown over US economy fears

LONDON, Aug 1, 2007 (AFP) – European and Asian stock markets plummeted Wednesday, mirroring heavy losses the previous day in New York, on mounting fears that weakness in the US housing sector could infect the world economy. In London, Frankfurt and Paris the main share indices were down almost 2.0 percent nearing the half-way stage.

The yen meanwhile hit a four-month high against the dollar and oil traded close to an all-time peak in New York as investors exited risky investments and turned to safe-havens, dealers said.

Wall Street took a pounding Tuesday, with its three main markets closing down more than 1.0 percent as news of spreading troubles in the US mortgage sector prompted investors to bank profits.

Japanese stocks slumped by more than two percent on Wednesday, with the Nikkei-225 index ending below 17,000 points for the first time in more than four months.

Economists said there were growing jitters about the potential fallout from problems in US subprime lending sector, where mortgages are provided to people with questionable credit histories.

Analysts are concerned that growing mortgage defaults will hurt banks and finance companies enough to curb the availability of credit on which the e