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Bank worries haunt global markets US stocks slide amid credit fears
(about 3 hours later)
Stock markets have fallen across Asia and Europe as confidence in the US banking sector was dented further by the resignation of Citigroup's boss. Major US stock markets have opened down after confidence in the banking sector was dented further by the resignation of Citigroup's chief executive.
Markets fell sharply in Asia in reaction to Charles Prince's exit, the second departure of a leading Wall Street bank boss within days. Markets in Europe and Asia have also seen falls in reaction to Charles Prince's exit, the second departure of a leading banking boss within days.
The Hang Seng index fell 5%, or 1,526 points, in Hong Kong while the Nikkei slid 248.56 points, or 1.5%, in Tokyo. The Dow Jones fell 0.6% to 13,514.87, the Nasdaq dropped 0.9% to 2,784.79, and the S&P slipped 0.7% to 1,498.71.
Shares also fell in London, Paris and Frankfurt although losses were limited. Stock markets in London, Paris and Frankfurt were also trading lower.
Credit squeezeCredit squeeze
The FTSE 100 benchmark index was down 94.3 points at 6,436.3 in late morning trade in London with Northern Rock, Barclays, Royal Bank of Scotland and Alliance & Leicester among finance stocks to suffer. The FTSE 100 benchmark index was down 1.4% at 6,438.40 in mid-afternoon trade in London, with Barclays, Northern Rock and Alliance & Leicester among the financial stocks seeing the largest falls.
Meanwhile, the Dax index was down 50.62 points at 7,798.87 in Frankfurt while, in Paris, the benchmark Cac index slipped 56.74 points to 5,663.68. In Frankfurt, the Dax index was down 0.6% at 7,803.28, while in Paris the benchmark Cac index slipped 0.96% to 5665.37.
The risk in the market is credit risk Jim Awad, WP Stewart Asset Management
By the close of trade in Asia the Hang Seng index was down 5% at 28,942.3 in Hong Kong, while in Japan the Nikkei had fallen 1.5% to 16,268.9.
Worries over banks' exposure to US sub-prime related debts has been causing market instability for several months.Worries over banks' exposure to US sub-prime related debts has been causing market instability for several months.
The market is very concerned about what is going on in the banking sector William Claxton-Smith, Insight Investment Shares of Citigroup dropped more than 4% in early US trade, and those in JP Morgan Chase fell more than 2%.
Meanwhile Merrill Lynch fell 3.2%, Morgan Stanley fell 3.6%, Goldman Sachs fell 3.4%, and Bank of America fell 1.8%.
'More to come'
"The risk in the market is credit risk," said Jim Awad, chairman of WP Stewart Asset Management in New York.
"You're getting plenty of indications that there are more write-downs to come. The fear is that if you get the credit market seizing up again, that could affect the economy going forward."
It is feared that the current credit squeeze - triggered by banks' unwillingness to lend while they assess the size of potential sub-prime mortgage related losses - will hit growth in the global economy.It is feared that the current credit squeeze - triggered by banks' unwillingness to lend while they assess the size of potential sub-prime mortgage related losses - will hit growth in the global economy.
Citigroup disclosed that its losses stemming from bad sub-prime related investments could amount to between $8bn and $11bn (£3.8bn and £5.2bn).Citigroup disclosed that its losses stemming from bad sub-prime related investments could amount to between $8bn and $11bn (£3.8bn and £5.2bn).
Mr Prince's departure followed the departure of Merrill Lynch boss Stan O'Neal last week after the firm suffered its first quarterly loss in five years.Mr Prince's departure followed the departure of Merrill Lynch boss Stan O'Neal last week after the firm suffered its first quarterly loss in five years.
'Nerves'
Traders digesting the scale of the crisis in the US banking sector are worried about the exposure of European banks to worthless sub-prime related assets.Traders digesting the scale of the crisis in the US banking sector are worried about the exposure of European banks to worthless sub-prime related assets.
"We will have a nervous day again today," William Claxton-Smith, from Insight Investment, said about the FTSE's prospects.
"The market is very concerned about what is going on in the banking sector. The big problem is the uncertainty that nobody really seems confident that anyone has got a handle on what is happening."
All eyes will also be on the US markets when they open on Monday amid fears that other US banks are sitting on huge losses and the credit crisis may still get worse.
The benchmark Dow Jones index made gains on Friday after positive employment data but trading has been highly volatile in the last few months as the lending crisis has worsened.