2:35AM New York, 8:35AM Frankfurt, 4:35PM Sydney– Investors cannot shake-off that falling home loan values will inevitably require more capital replenishment at banks. In the U.S. Nasdaq, S&P 500 lost more than 2% and in the global markets the Sensex index in India plunged 3.5%. European markets fell more than 1.5%. For the week Japan and Shanghai traded more than 3% lower.

Global Markets Update

U.S. stocks fell sharply led by a sharp loss in financial stocks. Rating agency Moody’s removed bond insurance companies MBIA and Ambac Financial Group from its top rating. Mortgage lenders Fannie Mae and Freddie Mac declined and leading banks traded lower. Wachovia Bank fell to a 12-year low.

Banks led the decliners after Wachovia Bank drifted to as low as 12-year low on the mounting worries that banks will have to eliminate dividend and raise more capital. SanDisk fell after Citigroup analyst said that the company may miss the earnings for the current quarter on slower sales. Regional banks rose after Huntington Bancshares reaffirmed its loan loss estimate.

European indexes drifted lower on persistent worries in the credit markets and rising inflation in the region. Germany reported a sharp rise in producer price index in May. The index increased at a rate of 6% from a year ago. Separately, Deutsche Boerse reported earnings per share increase of 61% in the first quarter but trading volume so far in the quarter has declined 33% from a year ago.

Latest wholesales inflation index in India surged to a 13-year high to 11.11%. The sharp rise in inflation was fueled by the rising costs of fuel, food and materials. Higher inflation numbers has sparked fears of tighter monetary policy by the central bank, stocks fell sharply. Last week, the Reserve Bank of India made a surprise interest rate rise last week.

UK stocks fell after yet another day of weak financial stocks. Sumitomo Bank is reported to agree to inject 100 billion yen in Barclays Bank. The bank has denied that it needs to raise capital to strengthen its capital base and has sufficient capital to cover the losses in its risky loans. Crude oil surged 3% as Israel conducted military exercises in preparation of possible strikes to Iranian nuclear installation.

Stocks in Japan declined after weakness in financial stocks kept broader averages lower. China hiked its fuel prices by as much as 18% inflation in India surged to 13-year high. In Tokyo trading Nikkei 225 declined 1.33% or 188.09 to 13,942.08, falling 0.2% for the week, and the broader Topix Index fell 1.4% to 1,356.74.

Stocks in Hong Kong fell but in Shanghai rose as the decision by the government to raise electricity and oil prices affected mainland airlines. Commodity stocks and power companies were active after China imposed a price freeze on thermal coal prices. In Shanghai trading, CSI 300 Index advanced 2.8% to 2,849.67. In Hong Kong trading Hang Seng Index edged down 0.23% to 22,745.60, rising 0.7% for the week.

Australian stocks fell as global financial stocks declined. The weakness in the U.S. trading and persistent worries related to the health of the U.S. banks kept Australian banks in check. ASX 200 index fell 1.5% to 5,288.30. Xstrata abandoned its offer for Indophil after a bid led by its chief executive offered 28% more. Victoria Supreme Court gave its approval for the merger between Zinifex and Oxiana. The newly merged company will be renamed Oz Minerals and will be the third largest mining company in Australia after BHP and Rio Tinto.

North American Markets indexes

Dow Jones Industrial Average fell 220.40 or 1.83% to a close of 11,842.69, S&P 500 closed down 24.90 or 1.85% to 1,317.93, and Nasdaq Composite Index decreased 55.97 or 2.27% to close at 2,406.09. In Toronto TSX Composite closed down 209.48 or 1.42% to 14,580.67.

Of the 30 stocks in Dow Jones Industrial Average 1 gained and 29 declined.
General Motors led the decliners in the Dow Jones Industrial Average with a loss of 6.8% followed by declines in Alcoa Inc of 4.6%, in Citigroup of 4.3% and in Bank of America of 3.7%.

The lone gainer in the Dow Jones index was Coca-Cola Company with a rise of 0.56%.

Of the stocks in S&P 500 index, 44 increased, 456 declined, and none were unchanged. Of the index stocks 6 increased more than 3% and 119 declined more than 3%.

Huntington Bancshare Incorporated led the gainers in the S&P 500 index with a rise of 29.8% followed by gains in Western Union with a rise of 8.3%, in Sovereign Bancorp of 5.6%, in SunTrust Banks, Inc. of 5.5% and in Fifth Third Bancorp of 3.7%.

MBIA Inc led the decliners in the S&P 500 index with a loss of 13.3%, in H&R Block Inc of 10.3%, in SanDisk Corp of 9.7%, Ford Motor Company of 8% and in Freddie Mac of 7.7%.

European Markets indexes

The European market indexes edged lower in the morning trading but accelerated their losses in the day on the weakness in New York trading.

The CAC 40 retreated 2.21% to 4,494.02. In Germany the DAX 30-index fell 157.73 points or 2.35% to 6,563.44. Shares in Switzerland fell as the Swiss Market index dropped 108.41 points or 1.51% to 7,050.53. The FTSE 100 fell 91.40 points or 1.60% to 5,617.00.