LONDON, Nov 19: Global stock markets fell heavily again on Wednesday after US inflation and housing data added to fears of a long and painful recession as the key auto industry wobbles on the brink of collapse.

The data showing record falls was much worse than expected and raised the prospect that deflation will soon be added to the problems facing governments already on the rack over how to tackle the growing economic crisis.

Dealers said pleas for government help by the three top US auto firms -- General Motors, Ford and Chrysler -- hit sentiment too as investors worried about the impact on employment and the wider economy if any one were to fail.

On Wall Street, stocks opened little changed overall but then gave way as investors decided to take profits made on Tuesday’s 1.83 per cent upturn in the face of the latest dire economic news.

The Dow Jones Industrial Average was down 1.82 per cent at around 1650 GMT.

“Overall, there just isn't much in the way of good fundamental news to get the market out of its current funk. Hence, there remains a strong inclination to sell into strength,” said Patrick O'Hare, analyst at Briefing.com.

US consumer prices plunged a record 1.0 per cent in October, with the 12 months headline rate falling to 3.7 per cent from 4.9 per cent in September.

“With economic growth and inflation pedalling backwards, deflation talk is deafening,” said Jennifer Lee at BMO Capital Markets. “Tighten your seatbelts as fourth-quarter growth is going to be ugly.”

Analysts warned that as spending falls, unemployment will rise, fuelling a vicious circle which can only complicate efforts to deal with the fallout from the global financial crisis.Data on US construction starts made equally gloomy reading.

Starts on new US homes and housing building permits in October slumped 38.8 percent to record lows.

“This report is a shocker,” said Patrick Newport, analyst at IHS Global Insight, predicting single-family housing starts would post double-digit declines in both November and December.

“When will starts turn around? If financial conditions improve, most likely about the middle of next year, but between now and then, starts are almost certain to drop another 20 per cent,” he warned.

Many analysts believe that the overall economy cannot recover until the housing sector stabilises and that seems to be still some way off.

“Today's report suggests that housing activity will continue to decline for some time,” said Gary Bigg at Bank of America.

“With a variety of headwinds facing the housing industry -- financial market turmoil, rising unemployment and tight credit among them -- a recovery in construction activity is not expected until mid-2009 at the earliest.”

In London, the FTSE 100 index of leading shares fell 4.82 per cent to 4,005.68 points. In Paris, the CAC 40 lost 4.03 per cent to 3,087.89 points and in Frankfurt the DAX tumbled 4.92 per cent to 4,354.09 points.

Elsewhere in Europe, Brussels dropped 4.22 per cent, Amsterdam lost 4.99 per cent, Milan fell 2.90 per cent, Madrid was down 3.74 per cent and Swiss stocks shed 2.67 per cent.

In Asia, Tokyo closed down 0.66 per cent, Hong Kong fell 0.77 per cent and Sydney dropped 0.7 per cent.—AFP