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Fresh credit fears swept global financial markets yesterday, pushing world stocks to their lowest levels since October 2006 as concerns intensified that the financial sector would have to raise more capital. Banks tumbled across the board after a Lehman Brothers report said a pending accounting change could force US mortgage refinancing groups Fannie Mae and Freddie Mac to raise $46 billion and $29 billion respectively in fresh cash to meet commitments. The MSCI main world equity index fell as low as 341.35, down one per cent, hitting its lowest level for 21 months. The index is now down 20 per cent from its all-time peak set last November, plunging into ‘bear market’ territory.
Wall Street was set for a weaker open with US stock futures falling half a per cent. “The bottom line... is that the world does not look as healthy a place as it did three months ago,” Barclays Wealth said in a note. “Given that in reality central banks have not been sitting idly by - but instead sounding more hawkish by the day - they likely underestimate the true hits to GDP that are around the corner.” In Europe, London’s FTSE 100 index was down 1.98 per cent at 5,403.80 points and Frankfurt’s DAX 30 shed 1.99 per cent to 6,268.78. In Paris, the CAC 40 index was down 1.75 per cent to 4,266.80 points after striking its lowest reading since July 2005 - at 4,224 points - in morning trade. “Asian stock markets have also been hit by the fear that the turmoil in the financial sector is not over yet,” said ABN Amro analyst Melinda Smith.Large American companies start revealing their latest quarterly results this week and some analysts believe that bank earnings will sustain further hits.
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