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World markets slump on earnings fears
Japan Market
A passer-by looks at an electronic stock board in downtown Tokyo Wednesday, Oct. 22, 2008. The benchmark Nikkei 225 stock average dropped 265.18 points to close at 9,041.07 in the morning session. - photo by Associated Press
    LONDON — World stock markets slumped Wednesday as a stream of disappointing corporate earnings in the U.S. fueled pessimism about the global economy despite further thawing in credit markets.
    Britain’s FTSE 100 index of leading shares closed down 189.84 points, or 4.5 percent, at 4,040.89, while Germany’s DAX was down 213.34 points, or 4.5 percent, at 4,571.07. The CAC-40 in France was 177.22 points, or 5.1 percent, lower at 3,298.18.
    Europe’s retreat was accentuated by another bad day on Wall Street, where the Dow Jones index of leading U.S. shares was 288.33 points, or 3.2 percent, lower at 8,745.33 by early afternoon New York time.
    The losses in Europe and the U.S. echoed those in Asia. Japan’s Nikkei 225 stock average fell for the first time in three days, dropping 631.56 points, or 6.79 percent, to 8,674.69, while Hong Kong’s Hang Seng sank 5.2 percent and South Korea’s main index shed 5.1 percent.
    The latest stock market jitters have been stoked by a stream of disappointing earnings updates out of the U.S. in the last few days. Fears about the economy have become the primary concern as worries over credit markets and the banking system have been assuaged, for now at least, by government efforts to shore up banks, as well as massive liquidity boosts from the world’s leading central banks.
    ‘‘What we’re seeing is reality dawning that conditions are dire,’’ said Jeremy Batstone-Carr, head of research at Charles Stanley in London.
    On Wednesday, Wachovia Corp., which is being bought by Wells Fargo for about $14 billion in stock, said it lost $23.89 billion in the third quarter, in contrast to last year’s equivalent earnings of $1.62 billion, while airplane maker Boeing reported a 38 percent slump in earnings as a strike halted production of commercial jets.
    Merck & Co. indicated it will slash 7,200 jobs as part of a new restructuring program amid a 28 percent plunge in third-quarter profits. Yahoo Inc. also said it is slashing 1,500 jobs while it braces for a deep downturn likely to extend well into 2009.
    Commodity stocks have been hit in Europe as faltering global demand lowers the cost of raw materials. Mining company BHP Billiton PLC was down 9 percent after it warned of uncertain economic conditions in China, the main driver of global economic growth in recent years.
    Oil stocks were also weighed down by another $3.83 fall in oil prices to $68.35 a barrel despite expectations that the OPEC oil cartel will cut production later this week in an attempt to shore up prices, which have fallen by 50 percent in just three months.
    Stocks in oil exporter Russia stocks fell as shares in energy companies followed sliding oil prices. The U.S.-dollar denominated RTS index closed 7.2 percent lower at 665.8 points while the MICEX index dropped 3.7 percent to 628.1.
    The biggest oil loser was Spain’s Repsol YPF SA, which was down nearly 16 percent, over mounting concerns about the state of the Argentine economy following the announcement Tuesday that the Argentine government plans to nationalize nearly $30 billion worth of private pension funds. A large chunk of Repsol’s business is in South America.
    The Merval index in Argentina has plunged 11 percent to 930.7 shortly after the Wednesday opening, adding to 11 percent losses Tuesday.
    ‘‘The concern must be that local bank depositors withdraw money from Argentine banks either to spend on dollar-denominated goods, such as gold, or to try and convert it into dollars, fearing that inflation is about to soar,’’ said Simon Smollett, an analyst at Calyon Credit Agricole.
    Worries over Argentina’s economy hit stock markets across the region, with Brazil’s Ibovespa index down 5 percent to 37,103 shortly after trading began Wednesday.
    Some relief to the growing earnings gloom has been provided by the continuing fall in interbank lending rates. The rate on three-month loans in dollars, known as the London Interbank Offered Rate or Libor, has fallen sharply, by 0.29 percentage point, to 3.54 percent, while the so-called European Interbank Offered Rate for three-month euro-denominated loans has fallen 0.03 percentage point to 4.936 percent, the lowest rate since June 5.
    Abnormally high interbank lending rates have been the catalyst for the crisis in the financial markets over recent weeks, raising fears they would choke off credit to businesses and individuals.
    Earlier, Asian markets suffered as markets fretted about the profit outlook ahead. Particularly hard hit were Japan’s megabanks, which slumped after The Nikkei financial daily reported that Mitsubishi UFJ would miss its net profit projection for the April-September period by about two-thirds. A stronger yen added to the misery in Japan, dragging down exporters such as automakers and consumer electronics firms.
    In China, the benchmark Shanghai Composite Index fell 3.2 percent to 1,895.82.
    In the currency markets, the euro was down to two-year lows just above $1.28, while the British pound slumped to US1.6201, its lowest level since September 2003 after Bank of England governor Mervyn King hinted at further rate cuts to come. It has since recovered slightly to $1.6248.
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    AP Writers Tomoko A. Hosaka in Tokyo, Tim Paradis in New York and Business Writer Jeremiah Marquez in Hong Kong contributed to this report.