Fear grips global stock markets
Stock markets across Europe have fallen steeply after dramatic share price falls in Asia.
The FTSE 100 share index was down 8% at 3,964 points. It opened 9.8% lower at 3887 points, below the 4,000-point level for the first time in five years.
There were similar falls across Europe – Paris was down 8.4% while Germany was down 9.1%.
Investors fear a global slowdown, despite interest rate cuts and huge cash injections by central banks.
The Prime Minister, Gordon Brown, has again called on other countries to follow Britain’s bank rescue package.
He told the BBC news channel; “What we need now is for other countries to be doing similar things”.
He said he was confident the bail-out would eventual help stabilise the economy:
“Everybody depends on banks. We’re trying to get the banks to do what they’ve traditionally done, to get the flow of money to businesses, to help people with their mortgages, to make sure people’s savings are safe,” he said.
In other major developments:
- Tokyo’s shares plunged 24% during the week, double their weekly fall during the 1987 market crash
- Oil prices plummeted to a one-year low in European trading, with the price of US crude oil falling below $83 a barrel.
- The three-month rate at which banks lend dollars to each other – known as Libor – has risen to 4.8%
- Finance ministers from the G7 are to meet in Washington later and President Bush is to make an address to the American people.
- Moscow and Jakarta stock markets remain suspended because of excessive volatility
- Trading in the Vienna market was suspended until Friday afternoon.
Despite concerted government action, investors are increasingly fearful the financial crisis will prompt a global recession.
“It’s a banking problem, it’s a credit crisis problem and it’s a complete loss of confidence worldwide,” said David Buik of BGC Partners in London.
The BBC’s business editor Robert Peston said markets were worried about Friday’s auction of insurance claims on the debts of the collapsed US investment bank, Lehman Brothers.
This could not come at a worse time for bank shares, said our correspondent.
‘Unstoppable selling’
Heavy falls were seen across Asia’s markets as a climate of fear took hold on Friday.
In Japan, the Nikkei index slumped in its biggest one-day fall since the 1987 stock market crash.
The crisis also claimed its first Japanese financial institution, with the insurance company Yamato Life going bankrupt.
“Selling is unstoppable in New York and Tokyo,” said Yutaka Miura, senior strategist at Shinko Securities in Tokyo.
“Investors were gripped by fear.”
Elsewhere in Asia was a similar story.
In India, the Mumbai market plunged 6.5% in early trading. Shortly afterwards, India’s central bank said it would make an additional $12.8bn (£7.5bn) available for the money markets.
Australian shares closed down 8.3%, Hong Kong’s benchmark Hang Seng index slumped to a three-year low while in the Philippines, share prices closed down more 8.3%.
In Indonesia, plans to re-open the stock market were suspended in order to prevent what the president of the exchange called “deeper panic”. Trading was halted for two days earlier this week.
Crisis meeting
The Dow Jones – the US benchmark index – ended down 7.3% on Thursday – tumbling below 9,000 points for the first time since August 2003.
“We’re way beyond fundamentals,” said Chris Orndorff, head of equity strategy at Payden & Rygel, in Los Angeles.
“This is just pure panic, that’s all it is.”
Finance ministers from the G7 leading industrial countries are set to meet in Washington to discuss the crisis.
US President George W Bush is due to make an address to the American people later in the day.
As well as the G7 meeting, talks will be held at the International Monetary Fund (IMF) in Washington.
The IMF has said it is ready to lend to countries hit by the global credit crunch, using an emergency lending procedure first used in the 1990s Asian crisis. It has about $200bn immediately available to lend but can tap other sources.