World stocks plunge on gloomy forecasts, data

LONDON (AFP) - World stock markets plunged into negative territory Tuesday on gloomy growth forecasts in Asia and news that the eurozone sank deeper into recession last year than had been feared.
After closing losses in Asia and Europe, US share prices fell hard as well on lingering concern for the health of financial institutions and as investors nervously awaited first quarter corporate earnings reports.
The Dow Jones Industrial Average at mid-day was down 1.68 percent at 7,841.81 while the Nasdaq shed 1.47 percent to reach 1,583.15.
Analysts noted that in the last four weeks the Dow had gained 20 percent, a trend that had encouraged investors to take profits.
Traders also said Wall Street was nervous ahead of the January-March earnings reporting season, which was to kick off after the market close Tuesday with aluminum giant Alcoa, a Dow component.
The market is expecting Alcoa to report a major loss.
Banking stocks were also under pressure following a news report highlighting the depth of the bad-asset problem plaguing financial institutions.
Financials are ... under pressure after the London Times reported the International Monetary Fund was set to forecast that the 'toxic assets that are clogging banks balance sheets could reach four trillion dollars, said analysts at the Charles Schwab brokerage.
In Europe, the London FTSE 100 index closed down 1.58 percent at 3,930.52 while in Paris the CAC 40 shed 0.94 percent to finish at 2,902.31. The Frankfort Dax gave up 0.63 percent to end the day at 4.322.50.
Elsewhere, there were declines of 0.77 percent in Milan, 1.92 percent in Brussels and 0.56 percent on the Swiss Market Index. Bucking the general trend, Madrid edged up 0.30 percent.
Its the calm before the storm, said Wilfried Beau of Meeschaert Gestion Prive in Paris.
Investors are on guard ahead of corporate results from the first quarter, which should shed light on their ability with resist the current financial turmoil.
But European shares were mainly affected Tuesday by news that the eurozone recession deepened in the fourth quarter of 2008.
The negative European GDP numbers were worse than expected, said Manus Cranny, markets commentator at MF Global Spreads in London. They are a stark reminder that 2009-2010 is going to be an incredibly tough year.
European investors headed for the exits on a report that the eurozone economy contracted 1.6 percent in the final quarter of 2008 in the face of collapsing exports and dwindling investment.
The figure was a downgrade from the previous estimate for a contraction of 1.5 percent in gross domestic product that was given on March 5.
For the 15 nations that use the euro currency, it was the third straight quarterly contraction, according to Eurostat, the EU statistical agency.
Worryingly, it is far from inconceivable that eurozone GDP contraction was even deeper in the first quarter of 2008, given largely dire data and survey evidence, warned IHS Global Insight economist Howard Archer.
Earlier Tuesday in Asia, Hong Kong and Tokyo turned weaker as investors took profits and turned cautious following losses on Wall Street on Monday.
Tokyos Nikkei-225 index fell 0.28 percent to 8,832.85 points, retreating from the previous days three-month high.
Regional market sentiment was dented Tuesday following the World Banks projection that developing nations in East Asia faced a pronounced slowdown in economic growth and a painful surge in unemployment.
Economic growth will slow to 5.3 percent in 2009, down from 8.0 percent last year and 11.4 percent in 2007, the Bank said in a report on the region, which excludes Japan, Hong Kong, South Korea, Singapore and Taiwan.
In December, it had forecast growth of 6.7 percent this year.
An additional one million people according to official data became unemployed in the region over the year to January, leaving about 24 million without work, according to the study.