AIG, HSBC Woes Knock Shares To 6-Year Lows

Stock markets in Asia fell broadly, with the MSCI index of Asia-Pacific stocks outside Japan hitting a 3-month low.

World stocks fell to their lowest level in almost six years on Monday and the dollar hit 3-year peaks after insurer AIG posted a $61.7 billion quarterly loss and HSBC launched Britain's largest ever rights issue.

American International Group <AIG.N>, the recipient of $150 billion in taxpayer aid last year, posted the largest quarterly loss in U.S. corporate history and took a $30 billion lifeline from the U.S. government.

HSBC, Europe's biggest bank, launched the $18 billion rights issue to shore up its balance sheet after it reported a 18 percent fall in adjusted pretax profit for 2008 and cut its dividend.

Renewed concerns about the health of the financial sector sparked a sell-off in broader risky assets, knocking oil by more than 5 percent, and fanned safety-seeking flows into government bonds across the board.

"The AIG bailout is being looked at closely - there is so much uncertainty out there about how many more bailouts there will be and the dollar at the moment is the main beneficiary," CMC Markets analyst James Hughes said. The MSCI world equity index <.MIWD00000PUS> fell 2.1 percent to its lowest level since April 2003. The index lost more than 10 percent last month, compared with a rise of 0.1 percent in February 2008.

The FTSEurofirst 300 index <.FTEU3> fell 4.1 percent. HSBC shares fell more than 20 percent.

"Everyone had lingering hopes that by the time we were moving towards the end of the first quarter there would be signs the banking industry and world economy would be stabilising and the pace of declines would be lessening," said Jim Wood-Smith, head of research at Williams de Broe.

"However, it appears the downward trend is picking up pace."

The dollar index <.DXY>, which measures the currency's strength against a basket of major currencies, hit its highest level since April 2006. The single currency fell to $1.2610 <EUR=>.

Concerns about the impact of a sharp economic deterioration in Eastern Europe have also weighed on the euro and euro zone stocks in recent weeks.

European Union leaders rejected a mass bailout of central and eastern European countries at a summit on Sunday, but held out the prospect of bringing them under the protection of the euro zone more quickly. [ID:nL1547427]

March Bund futures <FGBLc1> rose 71 ticks, benefiting from flows seeking safer investments.

Emerging stocks <.MSCIEF> fell 3.6 percent and U.S. crude oil <CLc1> fell 5.5 percent to $42.32 a barrel.