Asian and European markets tumbled Wednesday as investors watched a skittish Wall Street recoil from more bad news in the U.S. mortgage market.
Japanese stocks sank 2.2 percent to a four-and-half-month low, Hong Kong’s market fell 3.2 percent, and South Korean shares plunged 4 percent. Indian stocks also sank 4 percent.
Chinese stocks, which had shrugged off the global market turmoil until now, retreated from record highs. The benchmark Shanghai Composite Index fell 3.8 percent.
In Australia, there were heightened fears that woes from the U.S. subprime mortgage market were spreading when Fortress Investments Ltd., the high-yield fund manager of Macquarie Bank Ltd., said late Tuesday that investors in its two funds face losses of up to 25 percent, affected by price volatility in the U.S. credit market.
The funds weren’t directly exposed to U.S. subprime mortgages, but problems in that sector have pushed down the value of riskier investments in credit markets generally. While Macquarie Bank doesn’t have any direct exposure to the funds, the bank’s shares tumbled 10.7 percent to $63.30, helping drag down Sydney’s benchmark S&P/ASX 200 index 3.3 percent.
The slide in Asian markets followed a modest recovery Monday and Tuesday. There were sharp declines Friday, triggered by last week’s plunge on Wall Street.
When the Dow Jones industrial average fell again Tuesday — sinking 1.1 percent to 13,211.99 — more jitters rippled through Asian markets as investors worried the U.S. housing loan problems could drag on the U.S. economy, a key export market, and cause a sell-off in Asian stock markets.
The stocks of two major home-loan insurers dropped when they reported that a combined stake in mortgage company C-Bass worth more than $1 billion may have been wiped out.
“We are looking at whether this is just a good correction or if it’s the start of something bigger,” said Song Seng Wun, head of research at CIMB-GK Research in Singapore. “If the U.S. remains stable, with consumers gainfully employed, then we will be OK.”
Foreign investors, however, were already bailing out of South Korean shares, traders said, sending the Korea Composite Stock Price Index down 4 percent, to 1,856.45, the lowest close in a month.
In European trading, the U.K. FTSE 100 index fell 1.9 percent to 6,241.90, Germany’s DAX 30 index was down 1.5 percent at 7,469.71 and the French CAC-40 index dropped 2.2 percent to 5,626.05.
Deutsche Bank AG fell more than 2.6 percent as part of the wider decline in global markets.
The German bank reported Wednesday that its second-quarter profit surged 31 percent as its investment banking business proved to be solid amid global market jitters. Deutsche shares fell despite assurances that its exposure to the subprime mortgage market, or real estate loans made to borrowers with weak credit histories, was insignificant.
Similarly, French bank BNP Paribas fell 2.3 percent after posting a 20 percent jump in second-quarter net profit. Paribas also sought to assure investors that it has hardly been affected by the subprime mortgage fallout, or by tensions in the leveraged buyout market.
Beyond worries over the U.S. market, Japanese investors also fretted over disappointing earnings from the nation’s megabanks and political fallout from last weekend’s elections.
Agriculture Minister Norihiko Akagi, who was embroiled in a funding scandal, resigned Wednesday to take responsibility for the ruling party’s defeat in Sunday’s upper house election. He is the fourth minister to leave an increasingly unpopular Cabinet.
Tokyo’s Nikkei 225 fell 377.91 points, or 2.2 percent, to 16,870.98 points, the lowest since March 16.
In currency trading, the dollar was trading at 118.08 yen, down from 119.30 yen late Tuesday in New York. The euro fell to $1.3648 from $1.3703.