Forex and global stocks fall sharply on fears financial sector could worsen

Forex and financial markets have been gripped by fears the global financial sector may perform worse than calculated. Investor confidence has already been hit by talk that US insurance giant AIG will need a further injection of government cash with its report due to be released today.

In Europe, the UK's FTSE 100 fell by 3.2%, while Germany's Dax was down 2.76% and France's Cac 40 lost 2.67%.Earlier in Asia, Japan's Nikkei 225 index closed down 288.27 points, or 3.8%, at 7,280.15. In Hong Kong, the Hang Seng fell 3.9% to 12,314.5 points.

China's manufacturing sector had declined further last month. South Korean imports and exports slumped to a record as well. Japan reported a steep drop in car sales. Weak economic data from China and South Korea has also underscored fears about Asia's export-dependent economies.

Monday morning slide in forex and stock indices was followed by a poor performance on Wall Street on Friday last week after data showed that economic growth was even weaker than thought.

This is turning out to be one of the most tumultuous times on record in the global financial markets. "You're seeing the U.S. is sinking lower and lower, and we're still desperately searching for a bottom," remarked an analyst.