World stock markets slide further

LONDON (AFP) - Asian and European equities fell sharply again on Wednesday after overnight losses on Wall Street, where worries about the earnings season were underscored by a huge loss at US aluminium giant Alcoa.

In late morning trading in Europe, the London market fell 0.82 percent, Frankfurt shed 0.95 percent and Paris lost 0.99 percent in value.

In Asia, Hong Kong slid more than 3.0 percent, Tokyo dipped 2.69 percent and Sydney finished down 2.34 percent, with financial and resources stocks hit the hardest. Markets throughout the region were showing losses.

This followed a dismal day of trading on Tuesday in the United States, where the Dow Jones Industrial Average dropped 2.3 percent.

The US corporate earnings season got off on a sour note as Alcoa posted a quarterly net loss of 497 million dollars, with prices and demand down dramatically in the face of the global slowdown.

"Alcoa's first-quarter 497-million-dollar loss is weighing heavily on sentiment," said VTB Capital analyst Ivan Ivanschenko on Wednesday.

"Importantly, it also sets the tone for the whole reporting season and... (the) chances are (that) we shall see further weakness as investors realise that hopes of an economic recovery contrast markedly with corporate earnings."

World stock markets had plunged on Tuesday into negative territory on gloomy growth forecasts in Asia and news that the eurozone economy sank deeper into recession last year than had been feared.

"Here we go again," said analyst Stuart Bennett at Calyon, the investment banking arm of French bank Credit Agricole.

"Another poor performance by stocks, disappointing figures from Alcoa and the prospect that Q1 earning season will produce similarly sluggish figures from other companies has prompted the market to question the sustainability of the recent rise in global bourses," he added.

On Wednesday, the Hong Kong market was worst off, with the Hang Seng index handing back 3.04 percent, more than 450 points, to 14,474.86.

Francis Lun, general manager of Fulbright Securities, a Hong Kong brokerage, said that investors in Asia were "scrambling for an exit" after the tumble on Wall Street.

"It is all the fault of the US market," Lun said. "Everyone is dumping financial stocks after George Soros said the banks were no good."

Soros, the billionaire hedge fund manager, had said Tuesday that the month-long rally in the United States was a bear-market rally because the economy was still shrinking.

Investors have been especially worried about the troubled financial sector -- concerns that deepened following a newspaper report highlighting the depth of the bad asset problem plaguing institutions.

According to the Times newspaper of London, new forecasts from the International Monetary Fund (IMF) are set to suggest that toxic debts racked up by banks and insurers could reach four trillion dollars.

The IMF said in January it expected the deterioration of US-originated assets to reach 2.2 trillion dollars by the end of 2010, but it is understood to be looking at raising that to 3.1 trillion dollars in its next assessment of the global economy, due to be published later this month, the report said.

In addition, the IMF was likely to forecast 900 billion dollars for toxic assets that originated in Europe and Asia, the Times said.