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Asian Stocks Are Mixed; U.S. Economic Woes Haunt Markets15 Mar 2007 Asian stocks were mixed in the afternoon session Friday as fears that trouble in the U.S. subprime mortgage market could spread to the rest of the U.S. economy lingered. Japan closed lower while South Korea managed to recover earlier losses to finish flat. Greenspan Warns Subprime Problems Could Spill Over Former Federal Reserve Chairman Alan Greenspan said on Thursday there was a risk that rising defaults in subprime mortgage markets could spill over into other economic sectors. Speaking to the Futures Industry Association, Greenspan conceded that it was "hard to find any such evidence" about spillover from housing yet. But he added: "You can't take 10% out of mortgage originations without some impact." He said that subprime woes were "not a small issue" and seemed to result primarily from buyers coming into lofty housing markets late after big price run-ups that had left them vulnerable to hikes in adjustable mortgage rates. Default rates in the subprime segment of the U.S. mortgage market have jumped in recent months as the housing industry slowed and prices fell. The crisis has triggered broader concerns that the fallout may spread to mainstream lenders and damage the economy. Greenspan, whose words still move markets even though he gave up the Fed chairmanship more than a year ago, said that adjustable rate mortgages, or ARMs, have been moving up recently and that has made them a problem for homeowners who are stressed by higher monthly payments. Meantime, though, Greenspan said much of the strength in consumer spending over the past five years can be traced to capital gains on surging housing prices, whether they were both realized or not. That means that if home prices keep falling, there could be more of an impact on the broader economy's momentum, he indicated, since consumer spending fuels two-thirds of national economic activity. |