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Global market turmoil continues Global market turmoil continues
(about 2 hours later)
Losses on stock markets have continued after the collapse of fourth largest US investment bank, Lehman Brothers, which has filed for bankruptcy protection.Losses on stock markets have continued after the collapse of fourth largest US investment bank, Lehman Brothers, which has filed for bankruptcy protection.
European markets opened sharply lower for a second day, with the UK's FTSE 100 and Germany's Dax both down 1.7%. European markets fell for a second day, with the UK's FTSE 100 index down 2.1% and Germany's Dax index 0.9% lower.
Shares in Japan, South Korea and Hong Kong fell more than 5%, having been shut on Monday for public holidays.Shares in Japan, South Korea and Hong Kong fell more than 5%, having been shut on Monday for public holidays.
Lehman, which may be about to sell its core assets to Barclays, is the latest victim of the global credit crunch.Lehman, which may be about to sell its core assets to Barclays, is the latest victim of the global credit crunch.
Banks hitBanks hit
The FTSE 100 of leading UK shares fell 91 points to 5,113 in morning trade. The Dax index of leading German shares was down 106 points at 5,959 points and France's Cac 40 was down 65 points at 4,104 points. The FTSE 100 of leading UK shares fell 111 points to 5,093 in morning trade. The Dax index of leading German shares was down 54 points at 6,010 points and France's Cac 40 was down 35 points at 4,134 points.
The US stock market on Monday had its worst day's trading since 9/11, with the Dow Jones index ending the day down 504.48 points, or 4.42%, at 10,917.51.
FROM THE TODAY PROGRAMME More from Today programmeFROM THE TODAY PROGRAMME More from Today programme
Japan's benchmark Nikkei 225 index dropped 5% to a three-year low, shares in South Korea and Hong Kong shed almost 6% in value and Shanghai's index fell by about 3%.Japan's benchmark Nikkei 225 index dropped 5% to a three-year low, shares in South Korea and Hong Kong shed almost 6% in value and Shanghai's index fell by about 3%.
Chinese share prices closed 4.47% lower as the fallout from Lehman Brothers outweighed Beijing's first interest rate cut in years, announced on Monday.
The benchmark Shanghai Composite Index, which covers both A and B shares, was down 93.04 points at 1,986.64 after touching a low of 1,974.39.
Markets in Taipei and Singapore were also sharply down, and the pattern was repeated in Australia and New Zealand, although the falls were smaller.Markets in Taipei and Singapore were also sharply down, and the pattern was repeated in Australia and New Zealand, although the falls were smaller.
Bank stocks were hard hit again across Europe; in London HBOS was down about 12%, and Royal Bank of Scotland was down more than 7%. The US stock market on Monday had its worst day's trading since 9/11, with the Dow Jones index ending the day down 504.48 points, or 4.42%, at 10,917.51.
Barclays Bank - which today said it was in talks to take on some of Lehman's US operations - was one of the big fallers, down more than 5%. Central banks around the world have been carrying out emergency measures on Tuesday to keep markets liquid.
In Paris, Credit Agricole, Societe Generale, and BNP Paribas were all down by nearly 4%, while in Germany Commerzbank dropped 8.6% and Deutsche Bank fell 3.7%.
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  • The Bank of England put an extra £20bn (25bn euros; £36bn) into short-term money markets "in response to conditions in the short-term money markets" - four times the sum seen on Monday after Lehman's collapse
  • The Frankfurt-based European Central Bank said it had provided 70bn euros ($100bn; £56bn) in an emergency operation to keep money markets supplied with liquidity
  • The Bank of Japan carried out two injections of a combined 2.5 trillion yen ($24.1bn; £13bn)
  • Australia and India also pumped cash into their money markets
  • And Japanese-registered Lehman Brothers Japan and Lehman Brothers Holdings have applied to the Tokyo District Court for bankruptcy protection
  • Bank stocks were hard hit again across Europe; in London HBOS was down about 12%, and Royal Bank of Scotland was down more than 7%
  • Barclays Bank - which today said it was in talks to take on some of Lehman's US operations - was one of the big fallers, down more than 5%
  • In Paris, Credit Agricole, Societe Generale, and BNP Paribas were all down by nearly 4%, while in Germany Commerzbank dropped 8.6% and Deutsche Bank fell 3.7%
'Crisis''Crisis'
Central banks in Asia attempted to calm markets after similar steps on Monday by their US and European counterparts. On the currency markets, the dollar slid to a four-month low against the yen before recovering slightly. At 0820 GMT, it was down 0.7% at 103.70 yen having earlier dropped to 103.62 yen.
Big banks can no longer be under any illusion that they can make big, stupid financial bets and expect taxpayers to pick up the bill Robert Peston, BBC business editor Read Robert's blogCentral banks in cash injectionUS policy challengeQ&A: Lehman collapseLehman pension scheme in deficitBig banks can no longer be under any illusion that they can make big, stupid financial bets and expect taxpayers to pick up the bill Robert Peston, BBC business editor Read Robert's blogCentral banks in cash injectionUS policy challengeQ&A: Lehman collapseLehman pension scheme in deficit
The Bank of Japan injected 2.5 trillion yen ($24bn; £13bn) into the banking system. Australia and India also pumped cash into their money markets. The euro was down to $1.4234, having hit $1.4482 on Monday.
The collapse of Lehman, which had incurred billions of dollars of losses from the failing US mortgage market, threatens to deal further blows to other financial institutions, as they unwind deals with the former investment giant. The collapse of Lehman, which had incurred billions of dollars of losses from the failing US mortgage market, has raised fears that other financial institutions coudl be hit.
"We're in the middle of a crisis," said YK Chan at Phillip Asset Management in Hong Kong."We're in the middle of a crisis," said YK Chan at Phillip Asset Management in Hong Kong.
Meanwhile, there were fears AIG, once the world's largest insurers, could also face collapse. Meanwhile, there were fears that AIG, one of the world's largest insurers, could also face collapse.
The State of New York has announced a "multi-billion dollar financing plan" to stabilise the insurer's finances. The State of New York announced a "multi-billion dollar financing plan" on Monday to stabilise the insurer's finances.
Central banks in Europe and the US have also moved to reassure markets.
The US Federal Reserve has broadened its emergency lending scheme and the UK and European central banks have injected a total of $39bn into the financial system.
'Rough spots' ahead'Rough spots' ahead
US Treasury Secretary Henry Paulson said the US was "working through a difficult period in our financial markets right now as we work off some of the past excesses". On Monday, US Treasury Secretary Henry Paulson said the US was "working through a difficult period in our financial markets right now as we work off some of the past excesses".
Henry Paulson was upbeat despite the turmoilHenry Paulson was upbeat despite the turmoil
He said Americans could remain confident in the "soundness and resilience" of the US financial system.He said Americans could remain confident in the "soundness and resilience" of the US financial system.
But he warned that uncertainty remained and it was likely that there would be further "rough spots" ahead until the correction of the US housing market was completed.But he warned that uncertainty remained and it was likely that there would be further "rough spots" ahead until the correction of the US housing market was completed.
Mr Paulson said he was committed to working with regulators in the US and abroad, as well as policymakers in Congress to take the necessary steps "to maintain the stability and orderliness of our financial markets".Mr Paulson said he was committed to working with regulators in the US and abroad, as well as policymakers in Congress to take the necessary steps "to maintain the stability and orderliness of our financial markets".
But he gave no details of what such steps might mean.But he gave no details of what such steps might mean.
On Monday President George W Bush said: "In the long term I am confident that our financial markets are flexible and resilient and can deal with these adjustments."
Are you affected by the issues covered in this story? Are you an employee of Lehman Brothers or another financial institution facing uncertainty? Would you be willing to be interviewed by a BBC journalist? Send us your experiences using the form below.Are you affected by the issues covered in this story? Are you an employee of Lehman Brothers or another financial institution facing uncertainty? Would you be willing to be interviewed by a BBC journalist? Send us your experiences using the form below.
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