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Recession fears hit stock markets Recession fears hit stock markets
(about 2 hours later)
European and Asian shares have fallen on continuing fears of a US recession and slowing corporate profit growth.European and Asian shares have fallen on continuing fears of a US recession and slowing corporate profit growth.
The UK's FTSE 100 stock index fell 1.3% to 5946.40, while Germany's Dax and France's Cac fell about 1%.The UK's FTSE 100 stock index fell 1.3% to 5946.40, while Germany's Dax and France's Cac fell about 1%.
Earlier, Japan's Nikkei index had fallen to its lowest in more than two years, closing 3.4% lower at 13,504.51.Earlier, Japan's Nikkei index had fallen to its lowest in more than two years, closing 3.4% lower at 13,504.51.
The slide in share prices was triggered on Tuesday by a quarterly loss at US bank Citigroup and a report showing weak US retail sales over Christmas. The slide in share prices has been triggered by disappointing earnings at firms including Intel and Citigroup, and a weak US retail sales report.
Indexes tumbled on the news, with the UK FTSE 100 index shedding 3% on Tuesday and the negative sentiment seeping into Wednesday. Indexes have tumbled on the news, with the UK's FTSE 100 index shedding 3% on Tuesday and the negative sentiment seeping into Wednesday.
Hong Kong's benchmark stock index, the Hang Seng, closed down 5.4% at 24,450.85 on Wednesday - its biggest one day fall since the day after the 11 September terrorist attacks.
Germany's Dax was trading down 0.9% at 7498.20, and France's Cac shed 1.2% to 5189.99.
Further declines?
Analysts warned that more declines may be on the way as concerns about the corporate and economic environment persist.Analysts warned that more declines may be on the way as concerns about the corporate and economic environment persist.
"The fallout from the Citigroup result is significant," said Trent Muller of ABN Amro Morgan. Intel, which makes microchips that power most of the world's computers, added to the gloomy outlook with quarterly results that disappointed many investors and a lower sales forecast than had been expected.
"We will see a bit of panic selling with a lot of investors taking cash off the table today." Its shares fell 14% to $19.48 in electronic trading after the New York stock exchange had closed on Tuesday. Analysts said that this indicates that its shares will get hammered when the US stock market reopens later on Wednesday.
We will see a bit of panic selling with a lot of investors taking cash off the table today Trent Muller, ABN Amro Morgan
The negative report from Intel, spurred a sell-off in technology firms worldwide on the belief that they will not be able to sustain their current rate of earnings growth in the face of slower consumer and business spending.
South Korean mobile phone maker LG Electronics and LCD flat-screen TV maker LG Philips both fell almost 5% in earlier Asian trading, while German chipmaker Infineon dropped 3.2% in Europe.
"We will see a bit of panic selling with a lot of investors taking cash off the table today," said Trent Muller of ABN Amro Morgan.
Francis Lun of Fulbright Securities said that problems in the US, where a slump in the housing market and higher interest rates have amplified concerns, would continue to stalk the markets.Francis Lun of Fulbright Securities said that problems in the US, where a slump in the housing market and higher interest rates have amplified concerns, would continue to stalk the markets.
"American financial mismanagement has brought us to this economic meltdown," Mr Lun said."American financial mismanagement has brought us to this economic meltdown," Mr Lun said.
Mortgage marketMortgage market
Many investors are now predicting that interest rate cuts will be needed to keep the US economy going, and the US dollar fell as a result.Many investors are now predicting that interest rate cuts will be needed to keep the US economy going, and the US dollar fell as a result.
Investors tend to seek out currencies and assets in nations with higher interest rates as that increases their returns.Investors tend to seek out currencies and assets in nations with higher interest rates as that increases their returns.
On Tuesday, Citigroup said that it had made a net loss of almost $10bn (£5bn) for the last three months of 2007 because it had to cut the value of investments that were linked to the US housing market.On Tuesday, Citigroup said that it had made a net loss of almost $10bn (£5bn) for the last three months of 2007 because it had to cut the value of investments that were linked to the US housing market.
The bank, one of the biggest in the world in terms of assets, said the loss had been caused by an $18.1bn exposure to bad mortgage debt.The bank, one of the biggest in the world in terms of assets, said the loss had been caused by an $18.1bn exposure to bad mortgage debt.
This reinforced the extent of the housing crisis in the US, while spurring worries that other banks were still harbouring undisclosed losses.This reinforced the extent of the housing crisis in the US, while spurring worries that other banks were still harbouring undisclosed losses.
On Wednesday, Germany's Dax was trading down 0.9% at 7498.20, while France's Cac shed 1.2% to 5189.99. Hong Kong's Hang Seng closed almost 4% lower. The focus will now be on bank reports from JP Morgan Chase and Wells Fargo out later on Wednesday.