Shares fall on more economy fears

Global shares have fallen sharply on renewed concerns that the world economy faces an extended downturn.

The US's main Dow Jones index ended Tuesday down 177 points or 2% to 8,694, with sentiment knocked by poor results overnight from Starbucks.

US investor confidence was further hit by continuing fears over the future of General Motors, while European and Asian shares also fell.

Oil prices also kept up recent falls, declining to 20-month lows.

US light crude ended Tuesday trading down $3.08 to $59.33 a barrel, the lowest price since March 2007, as demand continues to fall as economies slow.

Back in July, US light hit an all-time high of $147 a barrel.

London's Brent fell $3.30 to $55.78.

'Unremitting bad news'

The UK's FTSE 100 share index ended down 3.6%, while Japan's Nikkei shed 3%.

Germany's Dax slid 5.3%, and France's Cac gave up 4.8%.

"Now the markets are worried about the economic crisis and the unremitting flow of bad news," said Neil Mackinnon, chief economist at ECU Group.

"We're in a situation where we really don't know how deep a recession we've in"
Jim Herrick, Baird & Co

"It is really worrying equity markets that the economic slump could be deep and long."

European and Asian stocks had enjoyed rises on Monday following China's announcement of a $586bn (£370bn) economic stimulus package. However the gains were short lived.

Tuesday's biggest fallers on the FTSE were the same mining firms that gained on Monday after the Chinese news.

Oil prices were also lower on Tuesday, with US light crude down $1.95 a barrel to $60.46, and London's Brent declining $1.84 to $57.21.

'Need clarity'

"We're in a situation where we really don't know how deep a recession we've in," said Jim Herrick, manager of equity trading at Baird & Co.

"Until there's some clarity on the economy and clarity with earnings, we'll definitely be stuck in this trading range."

GM's shares ended down 44 cents or 13% to $2.92 their lowest level since 1943, after having fallen 23% on Monday.

Analyst Ken Mayland, president of research firm ClearView Economics, said the situation at GM was "not pretty".

There is growing concern that GM will either have to be rescued by the US government, or else need protracted bankruptcy protection.

The speak of the House of Representatives and leading Democrat, Nancy Pelosi, said she would support government aid for the US car industry.

While the US government last month made $700bn (£455bn) available for the financial sector, car firms are currently not eligible to apply for this money.