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Markets plummet on banking woes Markets slump on banking worries
(about 1 hour later)
European and Asian stock markets have fallen heavily in reaction to the emergency rescue of US investment bank Bear Stearns over the weekend.European and Asian stock markets have fallen heavily in reaction to the emergency rescue of US investment bank Bear Stearns over the weekend.
London's FTSE 100 index was down almost 2%, in Paris the Cac 40 slumped 3% and Frankfurt's Dax fell 1.4%. London's FTSE 100 index was down 2.2%, in Paris the Cac 40 slumped 2.2% and Frankfurt's Dax fell 3.2%.
Shares in financial companies have been hard hit as investors worried that there might be more bad news to come. European bank shares have been hit. Societe Generale fell 8%, Commerzbank was down 7.5% and HBOS declined by 9%.
Asian stocks fell sharply, with Tokyo's Nikkei average closed 3.7% lower and Hong Kong's Hang Seng slumped 5.2%. Asian stocks also fell, with Tokyo's Nikkei average closing 3.7% lower and Hong Kong's Hang Seng slumping 5.2%.
Nervous investors
In Mumbai the Sensex was also down more than 5%.In Mumbai the Sensex was also down more than 5%.
Investors' confidence has been hit by the trouble 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 fraction of its earlier value.
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.
"Just buying an investment bank does not solve the problem," he added.
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.
Credit uncertainty
Investor's confidence has been hit by the trouble 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 fraction of its earlier value.
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.
"Just buying an investment bank does not solve the problem," he added.