(Updates with Wall Street outlook)
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 that the total bill might near $1 trillion.
The British pound hit an all-time low against the euro
<EURGBP=> as weak UK housing and consumer morale surveys fanned
expectations the Bank of England might cut interest rates by as
much as 50 basis points on Thursday.
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 [].
The MSCI main world equity index <.MIWD00000PUS> were down
0.2 percent, moving further away from Monday's one-month high.
"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 are currently being priced in are way too
optimistic."
European shares were dragged lower initially by financials,
notably UK mortgage lender HBOS <HBOS.L>, which slipped on a
brokerage downgrade, before erasing losses. The pan-European
FTSEurofirst 300 index <> was steady on the day.
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 in Tokyo.
U.S. stock futures were up 0.1 percent <SPc1>, pointing to a
slightly firmer start on Wall Street later.
STERLING UNDER PRESSURE
Sterling fell as low as 80 pence per euro <EURGBP=>, with
the IMF downgrading its British economic growth forecast this
year to 1.6 percent, which would mark the weakest rate for more
than a decade.
The dollar <.DXY> was steady against a basket of major
currencies. The euro inched up slightly to $1.5710 <EUR=>,
pulling further away from around $1.5500 hit last week.
The dollar was up 0.1 percent at 102.73 yen <JPY=>, having
hit a one-month high earlier.
European government bonds erased earlier gains as stocks
bounced off lows. The June Bund future <FGBLM8> was down 24
ticks.
In emerging markets, stocks <.MSCIEF> were down 0.15 percent
while emerging sovereign spreads <11EMJ> widened 1 basis point.
Oil prices were down 0.4 percent at $108.05 a barrel, while
gold was also slightly lower on the day at $904.50 an ounce.
(Additional reporting by Michael Taylor; editing by Stephen
Nisbet)
