LONDON — Stocks fell sharply worldwide today, after drops Monday followed declines on Wall Street last week amid investor pessimism about the U.S. government’s stimulus plan to prevent a recession.
U.S. markets were closed for Martin Luther King Jr. Day, but the downbeat mood from last week’s U.S. market declines circled through Europe, Asia and the Americas. On Monday, Britain’s benchmark FTSE- 100 slumped 5.5 percent to 5,578.20, France’s CAC-40 Index tumbled 6.8 percent to 4,744.15, and Germany’s blue-chip DAX 30 plunged 7.2 percent to 6,790.19.
In Asia, India’s benchmark stock index tumbled 7.4 percent, while Hong Kong’s blue-chip Hang Seng index plummeted 5.5 percent to 23,818.86, its biggest percentage drop since the Sept. 11, 2001, terrorist attacks on the U.S.
In Canada, the S&P/TSX composite index on the Toronto Stock Exchange fell 4.8 percent. Brazilian stocks plunged 6.6 percent on the main index of São Paulo’s Bovespa exchange, and Argentina’s benchmark Merval index fell 6.3 percent to close under 1,900 for the first time since August 2006.
Investors dumped shares because they were skeptical that an economic plan President Bush announced Friday would shore up an economy that has been battered by problems in its housing and credit markets. The plan, which requires approval by Congress, calls for about $145 billion worth of tax relief to encourage consumer spending.
“We’ve taken our lead from the Asian markets, who have not been impressed by the U.S. There’s debate if there’s going to be a recession in the U.S. I don’t think there’s much chance of that, though,” said Rich ard Hunter, an analyst at Hargreaves Lansdown Stockbrokers Ltd. in London.
Concerns about the outlook for the U.S. economy, a major export market for Asian companies, has sent the region’s markets sliding in 2008. Just last Wednesday, the Hang Seng index sank 5.4 percent.
“It’s another horrible day,” said Francis Lun, a general manager at Fulbright Securities in Hong Kong. “Today, it’s because of disappointment that the U.S. stimulus (package) is too little, too late, and investors feel it won’t help the economy recover.”
Japan’s benchmark Nikkei 225 index slid 3.9 percent to close at 13,325.94 points, its lowest close in more than two years. China’s Shanghai Composite index plunged 5.1 percent, partly on worries about mainland Chinese banks’ exposure to risky U.S. mortgage investments.
“People are certainly nervous about a potential recession in the U.S. spilling over to the rest of the world,” said David Cohen, director of Asian economic forecasting at Action Economics in Singapore.
“Maybe there’s still some wariness about (whether) politicians are able to come up with a compromise and act sufficiently quickly” on a stimulus package, Cohen said. “I think the impact would be marginal anyway.”
Investors took cues from the negative reaction to the president’s plan on Wall Street on Friday, when the Dow Jones industrial average slid 0.5 percent to 12,099.30, bringing its loss for the year so far to nearly 9 percent.
Traders also have shrugged off assurances from Federal Reserve Chairman Ben Bernanke that the U.S. central bank is ready to act aggressively — which means a likely big interest-rate cut this month — to help the sagging economy.
