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| Deepening financial crisis fears rattle global markets |
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Time is GMT + 8 hours
Posted: 6-Oct-2008 18:00 hrs |
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| Traders at the Hong Kong Stock Exchange on October 3. Deepening fears about the financial crisis in Europe and doubts about a 700 billion dollar US rescue have sent European and Asian stocks plummeting. |
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Deepening fears about the financial crisis in Europe and doubts about a 700 billion dollar US rescue sent European and Asian stocks plummeting Monday.. The latest 50 billion euro (68 billion dollar) rescue of German bank Hypo Real Estate and takeover of Dutch-Belgian bank Fortis by French giant BNP Paribas did little to ease a growing sense of panic over the crisis.. Germany's move to guarantee all savings deposits added pressure on other European governments to make a similar promise, following the lead already taken by Ireland and Greece.. The London, Frankfurt and Paris stock markets all lost four percent or more in early trading after Tokyo hit a four-year low on growing doubts about whether international efforts to stem the crisis would work.. "The Fed's bailout plan may have been passed on Friday but so far there's been no real reaction in credit markets and because of this, the natural assumption is going to be that the measures won't work, even if such a call is rather premature," CMC Markets dealer Matt Buckland said in London.. Amid the turbulence, the euro fell to a 13-month low of 1.3551 dollars. Oil prices fell below 90 dollars a barrel as the financial meltdown triggered fears of a global downturn, dealers said.. Hypo Real Estate (HRE) hailed the second rescue plan in a week -- that has become the biggest in German financial history.. "We are very thankful for the backing of all those involved," HRE boss Georg Funke said in a statement, though it was unsure whether he would hold onto his job.. On Sunday, intense talks between the finance ministry, Bundesbank central bank, private banks and market regulators resulted in an additional 15-billion-euro guarantee for HRE, which had already received guaranteed credits worth 35 billion euros.. Chancellor Angela Merkel warned however that "those who did irresponsible business will be held accountable".. Germany also offered unlimited protection for personal bank accounts, with the finance ministry saying the estimated value of the guaranteed accounts would total an estimated 568 billion euros.. The British government is considering shoring up ailing banks with billions of pounds in return for shares, media reports said. Finance minister Alistair Darling called a meeting of an emergency economy committee to consider the partial nationalisation of banks.. "I want to make it clear that we will do whatever it takes not only to stabilise the system but to help going forward, and that means perhaps some pretty big steps that we wouldn't take in ordinary times," Darling said Sunday.. BNP Paribas announced after a weekend of intense talks that it is taking control of ailing finance group Fortis's operations in Belgium and Luxembourg, in a deal which will make Belgium the largest shareholder in the French bank.. The deal leaves the Belgian and Luxembourg governments with reduced holdings in Fortis, which they partly nationalised a week earlier, in exchange for part of BNP Paribas, which becomes the biggest bank in Europe in terms of deposits.. Central banks continued to pump tens of billions of dollars into interbank money markets that are now essentially on life-support from state institutions because commercial banks are too frightened to lend to each other.. The markets represent the global economic bloodline and cannot be allowed to collapse.. Despite enormous infusions of emergency short-term cash from central banks, money is not circulating and short-term interest rates, principally the benchmark LIBOR rate, have shot up.. Analysts say very little money is being lent for more than a few days.. The LIBOR and similar short-term money markets determine the availability of loans for vast numbers of people around the globe, from business managers trying to fund their businesses to families needing to borrow and students seeking loans.. It was against this background that European governments first assured that their banking systems were safe, then promised support for their banks at a weekend mini-summit in Paris, and one after another began strengthening guarantees for bank deposits.. But the plunge of stocks in Asia and Europe was a strong signal that the need for a second attempt to save Hypo Real Estate has swept away market confidence that the US plan might mark the beginning of a quick turnaround. — AFP
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