World stock markets fell further Tuesday as investors continued to fret about the global financial sector after American International Group Inc. reported the biggest quarterly loss in corporate history, and HSBC Holdings PLC slashed its dividend and revealed it needed to raise nearly $18 billion from shareholders. View Slideshow We get it - the economy is in a downward spiral. But whose fault is it? Time magazine has laid out a list of the recession's biggest budget-busters, the... Wall Street remains fidgety too. Neither the Dow Jones or the broader Standard & Poor's 500 index are expected to make much of an advance at the open. The Dow tumbled 4.2 percent on Monday to 6,763.29, its lowest close since May 1997 while the Standard & Poor's closed 34.27 points, or 4.7 percent, lower at 700.82. During the session, the measure dipped below the psychologically important 700 level for the first time since October 1996. The FTSE 100 index of leading British shares fell below the 3,600 mark for the first time since the start of the Iraq war in 2003. By mid-morning London time, it was down 44.17 points, or 1.2 percent, at 3,581.66. Germany's DAX fell 25.06 points, or 0.7 percent, at 3,685.01 while the CAC-40 in France was down 8.31 points, or 0.3 percent, at 2,573.15. Earlier, Japan's Nikkei flirted with 26-year lows, ending 50.43 points, or 0.7 percent, at 7,229.72, while Hong Kong's Hang Seng index close 283.58 points, or 2.3 percent, lower 12,033.88. "There's an absence of any hooks to hang any good news, if there were any good news," said Howard Wheeldon, senior strategist at BGC Partners. The markets, he said, were suffering from "delayed action shock" in the wake of American International Group's announcement Monday that it needed another $30 billion from the U.S. government after reporting quarterly loss of $62 billion, the biggest loss in corporate history. "Yesterday sent shockwaves around the markets, which isn't surprising given that AIG has tentacles in so many markets around the world," said Wheeldon. The troubles confronting the financial sector were further highlighted by HSBC Holdings PLC on Monday, when it announced that it was looking to shore up its capital base by raising nearly $18 billion in new capital through a share issue and cutting its dividend by 29 percent. Worries about dividends — usually a stable source of income to investors — are increasingly weighing on stocks, with further cuts expected from a range of companies all around the world. Neil Mackinnon, chief economist at ECU Group, noted a warning from credit ratings agency Standard & Poor's that U.S. investors face the worst year for dividend cuts since 1938. "The equity market mood is very negative and there is just ongoing concern about banks' dividend reductions, cash calls and losses," he said.

Source