Economy fears send stocks falling

There is much uncertainty in the markets

Global stock markets fell on Friday amid fears over the state of the world economy and the banking industry, with finance firms among the main fallers.

The Dow Jones index was 1.8% lower in afternoon trade on Friday after seeing its lowest close since 9 October 2002.

Investors are worried over how long the slowdown will last, despite government intervention to boost their economies.

France's Cac 40 fell 4.25% to its lowest since April 2003, the FTSE 100 shed 3.2% and Germany's Dax shed 4.7%.

The Paris-based benchmark index ended at 2,750.55. The FTSE closed at 3889.06.

The Dow Jones industrial average declined 133.25 points to 7,332.70 just after noon in New York, while the Standard & Poor's 500 Index fell 1.84% to 764.58.

Japan's Nikkei index ended 1.8% down and Hong Kong's Hang Seng shed 2.49%.

South Korea was among the worst hit in Asia. Its main stock index fell 3.7%, while its currency, the won, weakened on fears about the health of local banks.

'Lack of clarity'

This week, US President Barack Obama signed a $787bn (£548bn) stimulus plan into law, but there is uncertainty over how much this will help boost the ailing banking sector.

Shares in banks fell sharply after a report in Bloomberg quoted Senator Christopher Dodd as saying it might be necessary to nationalise certain banks. The White House responded by saying it still believed the privately held banking system was the "correct" model, Reuters said.

But this failed to prop up finance stocks and Bank of America shares was trading 17% lower in mid-afternoon trade, while Citigroup shed 23%.

"We're going through a tug of war between optimism and pessimism," said Wasif Latif, portfolio manager at USAA Investment Management CoLatif.

"When there is a lack of clarity, it becomes more of an emotional or psychological environment. The mood can sway on any given day, based on the flow of news coming out."