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Shares slump as rescue bid fails Shares slump as rescue bid fails
(20 minutes later)
US and European shares have tumbled after the $700bn (£380bn) US bail-out was rejected and amid a slew of bad news from the troubled banking sector.US and European shares have tumbled after the $700bn (£380bn) US bail-out was rejected and amid a slew of bad news from the troubled banking sector.
Wall Street shares fell more than 6% after Congress surprised observers by not backing the rescue plan - the Dow Jones at one point losing 705 points.Wall Street shares fell more than 6% after Congress surprised observers by not backing the rescue plan - the Dow Jones at one point losing 705 points.
London's key index had lost 5.3% - its biggest one-day drop since January.London's key index had lost 5.3% - its biggest one-day drop since January.
Confidence had been smashed by the forced rescue of US bank Wachovia and Bradford and Bingley's nationalisation.Confidence had been smashed by the forced rescue of US bank Wachovia and Bradford and Bingley's nationalisation.
The Dow Jones index was 670 points (6%) lower at 10,473 points after the result emerged - throwing efforts to calm the US financial crisis into disarray. The tech-heavy Nasdaq lost 7.8% to 2,012.57.The Dow Jones index was 670 points (6%) lower at 10,473 points after the result emerged - throwing efforts to calm the US financial crisis into disarray. The tech-heavy Nasdaq lost 7.8% to 2,012.57.
The losses had been heavier, but were pared slightly as investors took advantage of cheap prices. Analysts said that until there was certainty over the future of the bail-out bill, tremendous unease would remain with the markets.
Meanwhile the dollar fell against other major currencies.Meanwhile the dollar fell against other major currencies.
And concern that a worsening economy would reduce energy demand saw the price of US light, sweet crude slump by $11.39 a barrel to $95.50.And concern that a worsening economy would reduce energy demand saw the price of US light, sweet crude slump by $11.39 a barrel to $95.50.
The fall on the FTSE 100 was its biggest one-day drop since January, with Germany and France's main markets seeing falls of 5% and 4.2% respectively.The fall on the FTSE 100 was its biggest one-day drop since January, with Germany and France's main markets seeing falls of 5% and 4.2% respectively.
Dramatic eventsDramatic events
The market moves came on another eventful day of global financial turmoil, which BBC Business Editor Robert Peston described as the "worst" since the credit crunch began.The market moves came on another eventful day of global financial turmoil, which BBC Business Editor Robert Peston described as the "worst" since the credit crunch began.
Developments include:
  • UK buy-to-let specialist Bradford and Bingley being nationalised with the government taking control of B&B's mortgages and loans, while its savings arms is being bought by Abbey. Bank shares fall after B&B move
  • Wachovia, the fourth-largest US bank, was bought by larger rival Citigroup in a rescue deal backed by US authorities Citigroup to buy US bank Wachovia
  • Benelux banking giant Fortis was partially nationalised by the Dutch, Belgian and Luxembourg governments to ensure its survival Deal agreed for Euro bank Fortis
  • The Icelandic government took control of the country's third-largest bank, Glitnir, after the company had faced short-term funding problems Iceland nationalises Glitnir bank
  • Central banks gave a massive liquidity injection to try to ease the credit squeeze
Developments include:
  • UK buy-to-let specialist Bradford and Bingley being nationalised with the government taking control of B&B's mortgages and loans, while its savings arms is being bought by Abbey. Bank shares fall after B&B move
  • Wachovia, the fourth-largest US bank, was bought by larger rival Citigroup in a rescue deal backed by US authorities Citigroup to buy US bank Wachovia
  • Benelux banking giant Fortis was partially nationalised by the Dutch, Belgian and Luxembourg governments to ensure its survival Deal agreed for Euro bank Fortis
  • The Icelandic government took control of the country's third-largest bank, Glitnir, after the company had faced short-term funding problems Iceland nationalises Glitnir bank
  • Central banks gave a massive liquidity injection to try to ease the credit squeeze
London's FTSE 100 index closed at 4,818.77 points - with several banking shares losing more than 10% of their value.London's FTSE 100 index closed at 4,818.77 points - with several banking shares losing more than 10% of their value.
Germany's Dax index ended 4.2% lower while France's Cac 40 slid 5%.Germany's Dax index ended 4.2% lower while France's Cac 40 slid 5%.
What is required is an overhaul of the whole economic system - a widespread fix Ann PettiforAdvocact International Why the bail-out would not have workedWhat is required is an overhaul of the whole economic system - a widespread fix Ann PettiforAdvocact International Why the bail-out would not have worked
'Contagious effect''Contagious effect'
Analysts said that the market downturn was not surprising after the latest fall-out from the banking sector.Analysts said that the market downturn was not surprising after the latest fall-out from the banking sector.
"There is a contagious effect," said Darren Winder, head of macro and strategy research at Cazenove."There is a contagious effect," said Darren Winder, head of macro and strategy research at Cazenove.
"The implications of a fallout from (the credit crunch) are far-reaching, there are dozens of quoted banks in Europe, so it would seem unlikely that they would all be unaffected by this.""The implications of a fallout from (the credit crunch) are far-reaching, there are dozens of quoted banks in Europe, so it would seem unlikely that they would all be unaffected by this."
The lack of support of the lower house of the US Congress for the plan to bail out Wall Street came despite President Bush urged the House of Representatives to pass it.The lack of support of the lower house of the US Congress for the plan to bail out Wall Street came despite President Bush urged the House of Representatives to pass it.
The bill had been designed to end the credit crunch - and send a strong signal to the markets.The bill had been designed to end the credit crunch - and send a strong signal to the markets.
What is your reaction to this vote? Do you live in the US? Are you worried about your finances? Send us your comments using the form below:What is your reaction to this vote? Do you live in the US? Are you worried about your finances? Send us your comments using the form below:
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