MercoPress. South Atlantic News Agency

Financial crisis and inflation fears plunge global markets

Latam was no exception to falling markets

Global shares fell sharply during Tuesday on fears over the state of the US economy, with the Dow Jones index closing at its lowest level in two years.

The Dow closed below 11,000 for the first time since July 2006 while London's FTSE 100 index closed at its lowest point since October 2005. Stock markets also fell across mainland Europe and Asia. The Dow Jones index, meanwhile, closed down 92.65 points, or 0.8%, at 10.962,54, with banks stocks particularly weak. Analysts blamed mounting concerns about the health of US financial institutions and the possible global fall-out for the market unrest. The trigger for the latest slide in share prices was news that the US government had taken steps to protect mortgage firms Freddie Mac and Fannie Mae., which guarantee nearly half of all US mortgage debt. Markets had initially steadied as traders absorbed the details of the US move, following the collapse of another lender, IndyMac. But while the plan was well received at first, analysts say optimism faded as investors focused on more negative issues and feared that shareholders of the two firms could lose out should the government step in to buy more shares. Shares in Fannie Mae and Freddie Mac both fell by more than 26% as US Treasury Secretary Henry Paulson said any government support for them would be done in a way that would "protect the US taxpayer". Worries spread to other financial stocks with the likes of Citigroup, Bank of America, Wachovia and American Insurance Group all suffering steep falls. In the UK, the FTSE 100 dropped 2.4% to its lowest close since October 2005 - with bank Royal Bank of Scotland and Carphone Warehouse among the biggest fallers. The financial sector in Germany was also hit where the Dax index lost 1.9% and hit its lowest point since October 2006. Meanwhile France's Cac 40 index ended 1.9% on the day, its worst finish in more than three years. Earlier, a sell-off in Asia hit Hong Kong's Hang Seng index, which fell 3.8%, while Japan's Nikkei 225 index slid 2% and Chinese shares fell 3%. Of the Asian losses, banks were the hardest hit as investors worried that US financial market woes would spill over to Asia. The Nikkei 225 - which has lost 11% of its value in the past month - fell to its first sub-13.000 point close since 15 April. India's main Sensex stock index, meanwhile, lost 4.9% in Mumbai. In Latinamerica with the exception of Brazil's Bovespa which experienced its second day of recovery (0.48%) surpassing the 61.000 milestone, the rest of markets plunged in line with the rest of the world. Argentina's Merval lost 2.25%; Chile's IPSA, 1.51% and Mexico's IPC, 0.30%.