Global Stock Markets Suffer Major Setbacks

Shares in Japan, India off by more than 4% as fears of U.S. slowdown weigh on stocks.

HONG KONG (AP) - Renewed worries over the outlook for U.S. interest rates sent global markets tumbling again on Tuesday, with the Japanese stock market plunging more than 4 percent, its biggest one-day loss in two years.

In Bombay, Indian shares plummeted 4.5 percent to their lowest point this year. South Korean shares dropped 2.9 percent, while Hong Kong plunged 2.5 percent.

European stocks opened sharply lower, with mining and technology stocks leading the decliners. London's FTSE 100 index dropped 1.4 percent, the German DAX Xetra 30 index fell 1.7 percent, and the French CAC-40 index slipped 1.6 percent.

Investors across Asia dumped stocks on speculation that the U.S. Federal Reserve might raise interest rates later this month, stoking fears of an economic slowdown in the U.S., the biggest export market for many Asian countries. A decline Monday on Wall Street also hurt sentiment.

Such concerns have roiled Asian markets in recent weeks, sparking a similar broad sell-off on Thursday. Until early May, they were among the world's best-performing markets this year.

The market's plunge comes as investors around the world anxiously await U.S. inflation data due out Tuesday and Wednesday.

''Wall Street is expecting a blood bath for inflation figures, and that's spooking foreign investors in Japan who are selling their most liquid holdings, like tech stocks, as they price this in,'' said Ben Hao, head of equity trading at Dresdner Kleinwort Wasserstein in Tokyo.

The government said earlier Tuesday that inflation at the wholesale level rose by just 0.2% in May, though the increase in the so-called core rate - which excludes food and energy costs - jumped by 0.4%.

Bank of England Governor Mervyn King added to investor nerves by signaling that the bank might be ready to boost interest rates after holding them steady at 4.5 percent for 10 months.

King said Monday the global economy was facing a ''bumpier stretch of the road'' and said monetary police may have been ''too accommodative.''

In Tokyo, the Nikkei 225 index fell 614.41 points, or 4.14 percent, to finish at 14,218.60 points, the lowest close since Nov. 16, 2005. It was the biggest percentage loss in a single day since May 10, 2004, and the biggest point drop since Sept. 12, 2001, after the terrorist attacks in the U.S.

Blue-chip technology stocks such as Sharp Corp. and Matsushita Electric Industrial Co. were hit particularly hard.

Hong Kong's blue-chip Hang Seng Index fell 387.02 points, or 2.5 percent, to 15,234.42 points. Chinese financial stocks, previously highly favored by retail and institutional investors, were among the most active and heavily sold stocks.

Indian shares, among those hit the hardest in recent weeks, fell sharply again, with the benchmark Sensex index falling 414 points, or 4.4 percent, to 9,063, its lowest point this year.

South Korean shares plunged 2.9 percent to a more than seven-month low, taking cues from declines on Wall Street and in the region. Australia's stock market slumped 2.56 percent, its biggest one-day fall since September 2001 amid continued nervousness in global markets ahead of U.S. inflation data.

More in Supply Chain