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London: Fears about the world banking system inundated the remaining support from the US to rescue Fannie Mae and Freddie Mac on Tuesday.
It brought the dollar to $1.6038 against the euro, a record low. Economic expectations were the lowest to be ever recorded.
The sentiment boost that investors achieved from the US Federal Reserve and Treasury Department plan soon dissipated in worries about other financial institutions.
MSCI's main world stock index was at a 21-month low and on track for an 11th consecutive daily loss. Its emerging market counterpart lost more than 2 per cent while Asia stocks fell to a two-year low.
The pan-European FTSEurofirst 300 was down 1.2 per cent and Japan's benchmark Nikkei average closed down 2 per cent.
On top of the troubles at Fannie and Freddie, two pillars of the US mortgage system, regulators seized the US mortgage lender IndyMac Bancorp Inc late last week following withdrawals by panicked clients.
The worries have made people temporarily forget other fears for the future, including record high oil prices threatening inflation, slowing growth in the US and European economies, and rising geopolitical concerns revolving around the Middle East.
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