PARIS, FRANCE - THE collapse of the subprime mortgage market in the United States and the subsequent global financial crisis has provoked the sharpest fall on world stock markets since the end of the Internet bubble in 2001-2002.

In the last year, leading indices have lost between 12 and 25 per cent of their value.

The sharpest plunge has been in Tokyo, 23.6 per cent, followed by Paris, 20.7 per cent, the Dow Jones Industrial Average in New York, 14.8 per cent, the US Standard and Poor's 500 index, 13.6 per cent, Frankfurt, 12.2 per cent, and London, 12.1 per cent.

Investor jitters regarding the health of securities backed by risky US home mortgages have weighed heavily on the financial sector. Major banks have announced big losses and asset writedowns while others have had to be saved with costly bailouts.

A credit squeeze, which emerged as nervous banks became reluctant to lend to one another and to businesses, has dragged down the most heavily indebted sectors and slowed the pace of mergers and acquisitions.

Initial signs that the turmoil was spreading from financial markets to the broader economy accentuated pressures on equity markets early in the year.

On January 21, for example, there were falls of 7.16 per cent in Frankfurt, 6.83 per cent in Paris, 5.48 per cent in London and 3.86 per cent in Tokyo.

A later surge in commodities prices eroded corporate operating margins and household purchasing power, severely penalising the consumer goods and automobile sectors. -- AFP