Global stocks slid on Tuesday, led lower by financial shares after Federal Reserve Chairman Ben Bernanke said a weakening housing market, tighter credit and rising oil prices threaten the economy. World stock markets were already nervous about the credit crisis' impact on the financial sector and economic growth before Bernanke's comments to the Senate Banking Committee. Shares of Bank of America, the No. 2 US bank, fell more than 5 percent at $19.03, and insurer American International Group, declined 9.5 percent to $20.41. Financial markets and institutions remain under “considerable stress,” but restoring stability is a top priority for the US central bank, Bernanke said. The Dow Jones industrial average slid 195.41 points, or 1.77 percent, to 10,859.78. The Standard & Poor's 500 Index fell 24.22 points, or 1.97 percent, to 1,204.08. The Nasdaq Composite Index tumbled 36.54 points, or 1.65 percent, to 2,176.33. His remarks came two days after the Fed and Treasury Department announced measures to aid mortgage finance companies Fannie Mae and Freddie Mac. Bernanke added that the stress on financial markets came as signs of inflation pressures grew. “Again the Fed talked of some heightened short-term risk with inflation and with economic growth,” said Steve Goldman, market strategist at Weeden & Co. in Greenwich, Connecticut. Fannie Mae's stock slid 23 percent to $7.12 and Freddie Mac tumbled more than 30 percent to $4.92. The S&P financial index fell more than 4 percent to its lowest levels since 1998. Shares of General Motors, a Dow component, slid more than 4 percent to $8.99 after the automaker announced a restructuring plan and said it is suspending its dividend as part of an effort to bolster its finances. Asian and European stock markets fell sharply Tuesday as investor confidence in the US financial system eroded further despite a government-backed plan to help beleaguered mortgage financiers Fannie Mae and Freddie Mac. Financials were hit particularly hard as investors worried that trouble in the US markets would spillover to Asia and Europe. By afternoon in Europe, Britain's FTSE 100 had fallen 2.55 percent to 5,165.20, Germany's DAX lost 2.60 percent at 6,039.20 and France's CAC-40 retreated 2.18 percent to 4,052.28. Fears of yet more bank losses in Europe weighed on stocks. Several major banks have written off billions and had to raise more capital. “We have got results coming out later in the week and there are worries there are going to be more write-downs,” said Lawrence Peterman, investment director at Eden Financial in London. Official figures showing inflation in Britain hit a higher-than-expected 3.8 percent in June, up from 3.3 percent in May, was also having an effect, Peterman said. In Asia, every major index suffered declines, with Hong Kong's Hang Seng Index dropping more than 3.8 percent and Taiwan's benchmark losing over 4.5 percent. n Tokyo, the Nikkei 225 index dropped nearly 2 percent to close at 12,754.56. Japanese traders were rattled by a local business newspaper report that the country's top three banks hold a combined 4.7 trillion yen ($44 billion) in Fannie Mae and Freddie Mac debt. Another newspaper report unnerved Taiwan's market with news that at least two leading financial institutions have invested in the mortgage giants, and the country's central bank may also have purchased their bonds. In Hong Kong, the blue-chip Hang Seng Index plunged almost 840 points to 21,174.77 - its lowest close in nearly four months. China's biggest lender, ICBC, dove nearly 5.2 percent, and HSBC lost more than 3 percent. Heavyweight China Life Insurance slid 5.3 percent. In China, the benchmark Shanghai Composite Index fell 3.4 percent to close at 2779.45. Elsewhere, South Korea's benchmark slid 3.2 percent, India's Sensex was down 4.6 percent in late trade and Australia's main index lost 2.1 percent.
