North American stocks appear set for heavy losses Thursday following steep declines in Asian and European markets.

Overseas, Asian and European markets posted sharp falls in the wake of the unfolding credit-market downturn. In Japan, the Nikkei 225 Index closed down 1.99% at 16,148.49, and Hong Kong’s blue chip Hang Seng Index fell 3.32% to finish at 20,666.09.

In midday trading in Europe, the UK’s FTSE 100 Index slumped 2.7% to 5,945.50, while France’s CAC-40 Index tumbled 2.6% to 5,299.59, and Germany’s DAX Index slid 2.4% to 7,268.72.

In today’s economic news, U.S. housing starts decreased 6.1% in July, pulling construction to its lowest rate in 10 years as sales keep tumbling and credit tightens.

Meanwhile, troubled U.S. mortgage lender Countrywide said it has been forced to tap an US$11.5 billion credit facility to fund its operations, as difficulty raising money in the credit markets threatened its business.

Here at home, Statistics Canada said Canadians acquired $4.9 billion worth of foreign securities in June, focusing on debt instruments. Meanwhile, non-residents removed $4.5 billion worth of Canadian securities from their portfolios over the month, largely due to the disposition of Canadian bonds.

The Canadian dollar opened at US92.54¢, down 0.24 of a cent.

In earnings news, J.C. Penney gave an upbeat update, reporting earnings above forecast and noting a good start to the back-to-school season. After the close, Hewlett-Packard reports results.

In other financial news, structured financings firm Coventree Inc. said a market disruption is continuing as its conduit partners failed in efforts to find buyers for maturing asset-backed commercial notes. This brings the total amount of liquidity requested by the conduits since Aug. 13 to about $1.6 billion, the Toronto-based company said today.

Gold futures dropped $6 an ounce to US$673.70. Oil futures fell $1.83 to US$71.50 a barrel.

The Toronto stock market plunged Wednesday afternoon, giving up earlier gains, and ended lower for a fifth day as credit worries lingered.

The S&P/TSX composite index closed down 193.86 points, or 1.5%, at 13,048.76.

The index has fallen in eight of 10 sessions in August. It has given up all the ground it had gained since April. It is now up about 1% year to date.

The junior S&P/TSX Venture composite index tumbled 123.76 points to 2,660.84.

In New York, he Dow Jones industrial average lost 167.45 points, or 1.29%, to end at 12,861.47 — or 8.4% below its record close. Wednesday marked the Dow’s first close below 13,000 since April 24.

The S&P 500 fell 19.84 points, or 1.39%, to finish at 1,406.70. The S&P is now 9.43% below its record high close and down 0.82% for the year. The Nasdaq composite index dropped 40.29 points, or 1.61%, to close at 2,458.83.