August 02, 2007	Thursday	Rajab 17, 1428

LONDON, Aug 1: European stock markets plummeted on Wednesday, mirroring heavy losses the previous day in New York, on mounting fears that weakness in the US housing sector could infect the world economy.

In London, Frankfurt and Paris the main share indices were down almost 2.0 per cent nearing the half-way stage. The yen meanwhile hit a four-month high against the dollar and oil traded close to an all-time peak in New York as investors exited risky investments and turned to safe-havens, dealers said.

Wall Street took a pounding Tuesday, with its three main markets closing down more than 1.0 per cent as news of spreading troubles in the US mortgage sector prompted investors to bank profits.

Economists said there were growing jitters about the potential fallout from problems in US subprime lending sector, where mortgages are provided to people with questionable credit histories.

Analysts are concerned that growing mortgage defaults will hurt banks and finance companies enough to curb the availability of credit on which the economy feeds.

That, in turn, could affect private equity groups because their takeover bids are often financed by large amounts of bank debt.

The central issue that concerns the equity market is really the extent to which this whole subprime fallout will affect a general credit squeeze and reverse the expansion we have seen in the global economy, said Mike Lenhoff, chief strategist at Brewin Dolphin Securities in London.

Sydney's main stock market meanwhile dived 3.3 per cent after market favourite Macquarie Bank said two high-yielding funds faced losses of up to $300 million (US$258 million).

Shares in Macquarie Bank, known for its deal making and massive executive pay-checks, shed 10.7 per cent as a result, enough to prompt Australian Treasurer Peter Costello to offer assurances that all was well.—AFP