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| Markets slump on banking worries | Markets slump on banking worries |
| (20 minutes later) | |
| Markets from New York to Tokyo have recorded heavy losses in reaction to the emergency bailout of US investment bank Bear Stearns over the weekend. | |
| In New York the Dow Jones Industrials tumbled 194 points, more than 1.5%, in early trading before recovering. | |
| London's FTSE 100 index was down 2.7%, in Paris the Cac 40 slumped 2.9% and Frankfurt's Dax fell 4.1%. | |
| European banks have been hit. UBS plunged 13.1%, Societe Generale fell 9.1% and Commerzbank was down 7.9%. | |
| US banks were hammered in pre-market trading, with Lehman Brothers down 30%. | US banks were hammered in pre-market trading, with Lehman Brothers down 30%. |
| The bank attempted to reassure investors on Monday about its financial situation. | The bank attempted to reassure investors on Monday about its financial situation. |
| "Our liquidity position has been and continues to be very strong," Lehman Brothers said in a statement. | "Our liquidity position has been and continues to be very strong," Lehman Brothers said in a statement. |
| Asian stocks also fell, with Tokyo's Nikkei average closing 3.7% lower and Hong Kong's Hang Seng slumping 5.2%. | Asian stocks also fell, with Tokyo's Nikkei average closing 3.7% lower and Hong Kong's Hang Seng slumping 5.2%. |
| Desperate times need desperate measures Craig JamesEconomist, Commsec Send us your comments | Desperate times need desperate measures Craig JamesEconomist, Commsec Send us your comments |
| In Mumbai, the Sensex was down 6.5%. | In Mumbai, the Sensex was down 6.5%. |
| Investors are worried that the collapse of Bear Stearns, one of Wall Street's biggest names, is a sign that the credit crunch is getting worse and lending might seize up. | Investors are worried that the collapse of Bear Stearns, one of Wall Street's biggest names, is a sign that the credit crunch is getting worse and lending might seize up. |
| Central bank help | Central bank help |
| Central banks have been trying restore some confidence to the financial system. | Central banks have been trying restore some confidence to the financial system. |
| The Bank of England on Monday made an extra £5bn ($10bn) available for banks to borrow - and found that the funds were five times over-subscribed. | The Bank of England on Monday made an extra £5bn ($10bn) available for banks to borrow - and found that the funds were five times over-subscribed. |
| On Sunday, the US Federal Reserve reduced its discount rate - the interest rate at which banks lend to each other - from 3.5% to 3.25% and offered to buy up the assets of other troubled banks. | On Sunday, the US Federal Reserve reduced its discount rate - the interest rate at which banks lend to each other - from 3.5% to 3.25% and offered to buy up the assets of other troubled banks. |
| The Fed is expected to lower its general interest rates on Tuesday by up to 1%. | The Fed is expected to lower its general interest rates on Tuesday by up to 1%. |
| "Desperate times need desperate measures. The Federal Reserve is doing what it takes to restore stability and if it means cutting the discount rate on a Sunday night in the US, then so be it," said Craig James, Chief Equities Economist at Commsec in Sydney. | "Desperate times need desperate measures. The Federal Reserve is doing what it takes to restore stability and if it means cutting the discount rate on a Sunday night in the US, then so be it," said Craig James, Chief Equities Economist at Commsec in Sydney. |
| Overnight inter-bank dollar lending rates have risen sharply in London to levels not seen since 11 September 2001, reflecting growing unease about the health of the US financial system. | Overnight inter-bank dollar lending rates have risen sharply in London to levels not seen since 11 September 2001, reflecting growing unease about the health of the US financial system. |
| Bear Stearns | Bear Stearns |
| Investors' confidence has been hit by the problems at Bear Stearns. | Investors' confidence has been hit by the problems at Bear Stearns. |
| The investment bank was forced to seek emergency funding from the US Federal Reserve last week and was sold over the weekend to JP Morgan Chase for a tiny fraction of its earlier value. | The investment bank was forced to seek emergency funding from the US Federal Reserve last week and was sold over the weekend to JP Morgan Chase for a tiny fraction of its earlier value. |
| The bank got into trouble when other banks refused to lend it money over fears that it had too many bad debts due to the sub-prime mortgage crisis. | The bank got into trouble when other banks refused to lend it money over fears that it had too many bad debts due to the sub-prime mortgage crisis. |
| The Fed has agreed to take over up to $30bn of Bear Stearns' assets, removing the risk for JP Morgan. | The Fed has agreed to take over up to $30bn of Bear Stearns' assets, removing the risk for JP Morgan. |
| The quick sale failed to calm investors' nerves who, this week, will receive earnings announcements from other big US investment banks, including Lehman Brothers, Goldman Sachs and Morgan Stanley. | The quick sale failed to calm investors' nerves who, this week, will receive earnings announcements from other big US investment banks, including Lehman Brothers, Goldman Sachs and Morgan Stanley. |
| "There is persistent credit uncertainty. Market players have been repeatedly let down which shows the sub-prime mortgage problems are so deep-rooted," said Atsuji Ohara, global strategist at Shinko Securities in Tokyo. | "There is persistent credit uncertainty. Market players have been repeatedly let down which shows the sub-prime mortgage problems are so deep-rooted," said Atsuji Ohara, global strategist at Shinko Securities in Tokyo. |
| "Just buying an investment bank does not solve the problem," he added. | "Just buying an investment bank does not solve the problem," he added. |
| Dollar woes | Dollar woes |
| Worries about the credit crisis and the health of the banking industry also undermined the dollar. | Worries about the credit crisis and the health of the banking industry also undermined the dollar. |
| It fell to 95.72 yen, its lowest level in more than 12 years. The euro hit a record against the dollar, buying $1.5903. | It fell to 95.72 yen, its lowest level in more than 12 years. The euro hit a record against the dollar, buying $1.5903. |
| The weak dollar boosted commodities, with oil rising to another record, light sweet crude traded at $111.80 before falling back. | The weak dollar boosted commodities, with oil rising to another record, light sweet crude traded at $111.80 before falling back. |
| The dollar is also falling because of the expectation that the US Fed will cut interest rates further, making it less attractive to hold dollars as opposed to other currencies. | The dollar is also falling because of the expectation that the US Fed will cut interest rates further, making it less attractive to hold dollars as opposed to other currencies. |
| Have you been affected by the credit crunch? Are you having problems getting a mortgage or re-mortgage? What impact will the troubles of Bear Stearns have? | Have you been affected by the credit crunch? Are you having problems getting a mortgage or re-mortgage? What impact will the troubles of Bear Stearns have? |