by Rory Mulholland
AFP

PARIS (AFP) - US home loan woes caused more turmoil on world markets Friday despite the tens of billions of dollars released by central banks to stop the problem turning into a global economic crisis.

London’s FTSE stock market closed a whopping 3.71 percent lower and European and Asian shares slumped after losses tied to US subprime mortgages — high-risk home loans to people with poor credit histories — spread.

In the United States, the Dow Jones Industrial Average plunged more than 200 points in the morning but rallied late in the day to ended down just 30.32 points (0.23 percent) at 13,240.36. The tech-rich Nasdaq composite fell 11.60 points (0.45 percent) to 2,544.89.

The growing crisis caused the price of oil to fall for the third straight day as speculators rushed to bank profits on concerns that subprime fears might weaken energy demand.

Central banks across the world responded by pumping tens of billions of dollars into the banking system, offering loans at lower rates to commercial banks to forestall a credit crunch that could damage economic growth.

“The European financial system is facing a serious but not ‘catastrophic’ crisis,” said an analyst at US investment bank Morgan Stanley, adding that “it may take weeks before the true depth of the credit problem is revealed.”

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