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Investors edgy as US stocks fall Investors edgy as US stocks fall
(30 minutes later)
US stock markets sank in early trade on fears the bailout of insurance giant AIG would not be enough to dispel the gloom engulfing the financial world. US stock markets sank on fears the bailout of insurance giant AIG would not be enough to dispel the gloom engulfing the financial world.
AIG's rescue and a potential takeover of UK lender HBOS had earlier boosted confidence in Asia and Europe. Finance firms slumped with Goldman Sachs down 41% and Morgan Stanley 21% lower in afternoon trade.
But markets were volatile as nervous investors tried to make sense of the dramatic events in recent days. Investors were unnerved by recent dramatic events, including Lehman Brothers' demise, leading European indexes to end down.
The widely watched Dow Jones industrial average shed some 200 points, or 1.89%, to 10,850.10 in afternoon trade. The Dow Jones industrial average shed more than 300 points, or 3%.
Finance firms were among the main fallers on the Dow with Morgan Stanley 42% lower Goldman down shedding 22%. The FTSE 100 closed 2.2% lower while France's Cac 40 shed 2.1% and Germany's Dax shed 1.7%.
Meanwhile on the FTSE, shares in top UK mortgage lender HBOS, which has faced heavy selling this week, had a rollercoaster ride.
HBOS shares fell some 50% before initially recovering after it emerged that it was in advanced talks to be taken over by Lloyds TSB, only to fall again later, slipping 20%.
It has been a tumultuous week on financial markets, with significant changes in the financial landscape.
The global financial crisis In picturesThe global financial crisis In pictures
It has been a tumultuous week on financial markets, with significant changes in the financial landscape.
Key events on Wednesday included:
  • Beleaguered HBOS in merger talks with Lloyds TSB after a steep fall in its share price
  • US insurance giant AIG being bailed out by the US government
  • Volatile stock markets as global investors remain nervous
  • Trading on the Russian stock exchange being suspended
  • Barclays snapping up key assets from Lehman Brothers after its bankruptcy
Key events on Wednesday included:
  • Beleaguered HBOS in merger talks with Lloyds TSB after a steep fall in its share price
  • US insurance giant AIG being bailed out by the US government
  • Volatile stock markets as global investors remain nervous
  • Trading on the Russian stock exchange being suspended
  • Barclays snapping up key assets from Lehman Brothers after its bankruptcy
The FTSE 100 index of leading shares was down 1.85% at 4932.8 reversing earlier gains, with banking shares remaining volatile. Meanwhile in London, shares in top UK mortgage lender HBOS, which has faced heavy selling this week, had a rollercoaster ride.
HBOS shares fell some 50% before recovering after it emerged that it was in advanced talks to be taken over by Lloyds TSB.
But by close of trade HBOS was 19% lower, while Royal Bank of Scotland shed 10.4%.
I don't think anyone has got any or much confidence in market direction for more than a few days Darren Winder, CazenoveI don't think anyone has got any or much confidence in market direction for more than a few days Darren Winder, Cazenove
Shares in Barclays were up 5%, while Lloyds TSB shed 0.1%, reversing earlier gains, while Royal Bank of Scotland was down 10%.
Topsy-turvy tradeTopsy-turvy trade
The White House on Wednesday defended the takeover of AIG, saying: "You have a government that is willing to lead, act where appropriate, and govern to make sure that we limit broader financial harm to the economy," said White House press secretary Dana Perino.
Trade is likely to remain rocky amid concern that financial system instability will continue after the dramatic events of the past few days.Trade is likely to remain rocky amid concern that financial system instability will continue after the dramatic events of the past few days.
"I don't think anyone has got any or much confidence in market direction for more than a few days," said Darren Winder, a strategist at Cazenove."I don't think anyone has got any or much confidence in market direction for more than a few days," said Darren Winder, a strategist at Cazenove.
AIG's bail-out follows the collapse of US investment bank Lehman Brothers, which caused share prices to plummet across the world's financial markets.AIG's bail-out follows the collapse of US investment bank Lehman Brothers, which caused share prices to plummet across the world's financial markets.
Another investment bank, Merrill Lynch, has been sold off to Bank of America.Another investment bank, Merrill Lynch, has been sold off to Bank of America.
France's Cac 40 share index was down 0.24%, while Germany's Dax index was 0.64% lower, reversing earlier gains as Wall Street opened.
Russia's stock exchange suspended trade following steep falls in shares.Russia's stock exchange suspended trade following steep falls in shares.
Asian shares had a mixed session. Stocks in Tokyo, Taipei, and Seoul all rose, although prices in Hong Kong, Shanghai and Australia lost ground.Asian shares had a mixed session. Stocks in Tokyo, Taipei, and Seoul all rose, although prices in Hong Kong, Shanghai and Australia lost ground.
Japan's Nikkei 225 index ended up 1.2% at 11,749.79, having risen by as much as 2.3% earlier in the day. The index had hit a three-year low on Tuesday.Japan's Nikkei 225 index ended up 1.2% at 11,749.79, having risen by as much as 2.3% earlier in the day. The index had hit a three-year low on Tuesday.
Hong Kong's Hang Seng index ended down 3.6% at 17,637.19 points.Hong Kong's Hang Seng index ended down 3.6% at 17,637.19 points.