U.S. Market Pangs Spread to Foreign Indexes

Wall Street’s latest woes are making a bad situation worse in many already-battered foreign stock markets.

Share prices tumbled in Europe and Latin America in tandem with the U.S. market’s drop. Before U.S. trading began Wednesday, Asian markets had slumped, anticipating a weak U.S. opening. Asian markets fell further early today.

European shares ended at their weakest since early February as investors dumped tech issues while digesting the Federal Reserve’s warning Tuesday that the U.S. economy may be slowing too fast.

“The market is clearly now focusing on the fact there is going to be a significant reduction in capital spending across the United States,” said Jeff Currington, head of European equities at Morley Fund Management.

Many European investors had thought that a slowing U.S. economy would only hit techs such as personal computer makers, but they now worry it will mean slashed spending on tech and telecom equipment across the board, he said.

“If it was just the PC market, then not many stocks would be affected in Europe, but if it becomes more widespread, then it affects European companies more directly,” such as telecom giants, Currington said.

Dragged down by tech and telecom issues, the main German stock index fell 3.6% and now is down 23.1% from its 2000 peak--a bigger decline than the U.S. blue-chip Standard & Poor’s 500, which is down 17.2% from its peak.

The French market fell 3.2%, as telecom and computer networking giant Alcatel slid 9.6%.

The Spanish market fell 4.2% on Wednesday while the Swedish market lost 4.7%.

Among European telecom stocks traded on the New York Stock Exchange, France Telecom dropped $6.81 to $81.19 on Wednesday and Nokia dropped $4.38 to $41.13.

In Latin America, the Mexican IPC index slid 5% as investors focused on the potential for the Mexican economy to slide if the U.S. economy’s problems deepen. The Mexican market has lost nearly 38% from its 2000 peak.

In Brazil, an interest-rate cut by the country’s central bank wasn’t enough to offset worries about the effects of a U.S. slowdown. Brazil’s Bovespa stock index sank 4.7%.

In Asia, Japan’s Nikkei-225 share index fell 217.94 points, or 1.5%, to close at 13,914.43 on Wednesday. It was the Nikkei’s fifth straight daily loss and its lowest close since Feb. 9, 1999, as investors continue to bail out on nervousness over the country’s fragile economy.

The Nikkei was off 387.02 points, or 2.8%, to 13,527.41 at midday today.

The Bank of Japan earlier this week downgraded its overall assessment of the nation’s economic recovery for the first time since July 1998. A day later the central bank said another risk to Japan’s economy was from a slowdown in exports from Asia.

The South Korean market, one of the world’s worst performers this year, continued to fall Wednesday, losing 3.1%. It was down 0.7% at midday today, extending its decline from its 2000 peak to 52%.

The Hong Kong market fell 1.7% Wednesday and lost another 1.7% by midday today.

In Taiwan the main share index fell 2.6% to 4,817.22 today, a 57-month low.

For U.S. investors in foreign stocks, the only good news Wednesday was that the euro’s value rose to 90.8 U.S. cents, the highest since August.

A dive in the euro this year had made U.S. investors’ foreign-stock losses worse. Now, if the euro gains because of concerns over the U.S. economic slowdown, it will help cushion U.S. investors’ losses in European stocks.

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Bear Markets All Around

Most major world markets are in bear markets now, meaning their key stock indexes have fallen more than 20% from their peaks. How key indexes fared Wednesday, and their losses from their peaks:

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Wed. Wed. Drop from Market/index close change 2000 peak Britain/FTSE-100 6,176.70 -1.9% -11.1% France/CAC-40 5,766.30 -3.2 -17.0 Hong Kong/Hang Seng 14,930.72 -1.7 -18.8 Germany/DAX 6,248.76 -3.6 -23.1 Brazil/Bovespa 14,622.41 -4.7 -23.2 Canada/TSE-300 8,642.53 -2.7 -24.3 Singapore (S. Times) 1,929.32 -1.6 -25.3 Japan/Nikkei-225 13,914.43 -1.5 -33.2 Argentina/Merval 404.68 -1.8 -37.6 Mexico/IPC 5,231.85 -5.0 -37.9 S. Korea (compos.) 514.21 -3.1 -51.8 U.S./S&P; 500 1,264.74 -3.1 -17.2 U.S./Nasdaq 2,332.78 -7.1 -53.8

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Percentage changes measured in native currencies.

Sources: Bloomberg News, Times research