By Jeremy Gaunt, European Investment Correspondent
LONDON, April 9 (Reuters) - A new batch of concerns about
huge losses in the global financial sector hit stocks on
Wednesday, after warnings from a leading U.S. savings group and
the IMF's prediction of a total $1 trillion bill.
The dollar was also weaker and the British pound hit an all
time low against the euro <EURGBP=> ahead of an expected
interest rate cut.
World stock markets fell on worries about the financial
sector and growing angst about future earnings. Wall Street was
shaken overnight by news that Washington Mutual Inc <WM.N>, the
largest U.S. savings and loan, expects a large quarterly loss.
The lender also slashed its dividend even as it received a
$7 billion capital infusion.
The International Monetary Fund also said on Tuesday that
turmoil in credit markets could now spread to other mortgage and
corporate debt markets with losses possibly approaching $1
trillion and with risks of spillovers to emerging economies.
Separately, Group of Seven powers were set to endorse a
series of recommendations from the Financial Stability Forum to
improve practices by banks and financial markets in the wake of
the subprime market collapse.
A European G7 source confirmed a report in the Wall Street
Journal listing a series of plans [].
European shares fell, partly led by financials, notably UK
mortgage lender HBOS <HBOS.L>, which slipped on a brokerage
downgrade. The pan-European FTSEurofirst 300 index <> was
down 0.6 percent.
"If you look across the whole of the equity universe, every
market looks softer," said Peter Dixon, an economist at
Commerzbank. "Many of us have been saying for some time that the
earnings numbers that that are currently being priced in are way
too optimistic."
Earlier, Japan's Nikkei share average <> fell 1.1
percent as fresh worries about the U.S. economy hit exporters.
"Even if you suppose the worst is over for financials, the
worst time for the economy and corporate earnings is still to
come," said Soichiro Monji, chief strategist of the equity
management department at Daiwa SB Investments.
The Nikkei shed 138.54 points to 13,111.89. The broader
TOPIX index <> declined 1.5 percent or 19.79 points to
1,262.90.
WEAK DOLLAR, STRONGER BONDS
The dollar <.DXY> slipped on increasing evidence that the
Federal Reserve is worried that problems in the financial market
may trigger more weakness in the U.S. economy.
Sterling, meanwhile, hit a record low against the euro,
pressured lower after a fall in UK consumer morale underscored
escalating troubles in the economy, and bolstered expectations
that the Bank of England will cut interest rates on Thursday
[].
The euro inched up 0.1 percent to $1.5717 <EUR=>, pulling
further away from around $1.5500 hit last week.
The dollar fell 0.3 percent to 102.25 yen <JPY=>, reversing
earlier gains that took it near a one-month high.
The euro pushed up to 80 pence <EURGBP=> early in the
European session, before pulling back slightly.
Euro zone government bond prices generally rose, squeezing
yields lower as the European and Asian shares fell.
In the cash market, the 10-year Bund traded around the
psychologically key 4 percent level and was last yielding 3.996
percent <EU10YT=RR>, around three basis points less than late
Tuesday.
The two-year Schatz yielded 3.487 percent <EU2YT=RR>, 4
basis points less than the previous session's late levels.
(Additional reporting by Michael Taylor; Editing by Ruth
Pitchford)
