LONDON | Doubts over whether the U.S. government’s bail-out package would stem the global economic crisis triggered panic in financial markets around the world Monday, sending share indexes plunging on investor fears that economic growth is posed to slow still further.
No continent was spared. From Asia and sweeping across Europe, stock markets plunged steeply as investors reflected little confidence in Washington´s $700 billion plan to buy “toxic” assents from banks and other financial institutions.
The devil appeared to be in the detail, or the lack of it. Amid that mood of uncertainty, Asian markets took a beating from investors first, followed by a fall of about 5 percent in key indexes in Britain, Germany and France.
“Everyone is losing confidence,” said Singapore trader Mark Tan, who is involved in managing some $20 billion in equities and bonds at UOB Asset Management. “The problem now,” he told the Associated Press, “is that the lack of foreign confidence could affect the Asian consumer.”
That, Mr. Tan said, “would lead to a bigger slowdown in Asia than expected.”
As the sun moved across Europe, the economic scene was bleak and got bleaker. “We have a seriously weak and fear-driven market at our hands,” Tom Hougaard, chief market strategist at City Index in London, told journalists. “It is anyone´s guess where we will end the day.”
By then, much of the damage had been done – Tokyo closing down 4.5 percent, Hong Kong´s stock market losing 5.0 percent, Seoul slipping 4.3 percent, Singapore plunging 5.23 percent, Sydney faring little better at 3.3 percent down.
Early on, it seemed only to worsen. The Indonesian market fell by 10 percent, Oslo´s fell by 9.0 percent and Russia´s RTS exchange had to suspend trading twice as prices slumped by more than 8 percent.
London’s FTSE 100 stock index dropped by 391 points to 4589.2, its lowest level in four years, wiping $172 billion off value of stock shares.
In mainland Europe, stocks continued to fall after the German government had to bail out Hypo Real Estate, the country´s second-biggest commercial property lender, with a $68 billion rescue. Paris’s CAC sustained largest fall since it was formed in 1988.
The Bank of England and other central banks across Europe were forced to offer more than $74 billion to banks in short-term loans to maintain liquidity.
Trading in shares of Benelux bank Fortis was suspended, and BNP Paribas gained a 75 percent controlling interest in the financial group after an emergency deal worked out with the governments of Belgium and Luxembourg.
The lack of detail in the U.S. bail-out package was cited as a major contributor to the instability and uncertainty that rocked the European and Asian markets.
“What the markets need,” said Richard Hunter, head of British equities at Hargreaves Lansdown Stockbrokers in London, “are some more details about exactly when and how these plans are going to come in – and they need some proof that some of these measures are taking hold.”
Amid all the chaos, a form of inertia appeared to be grabbing hold. “The Fed´s bail-out plan may have been passed on Friday,” Matt Buckland, of London´s CMC Markets, told the British Broadcasting Corp., “but so far there´s been no real reaction in credit markets.”
“Because of this,” Mr. Buckland said, “the natural assumption is going to be that the measures won´t work, even if such a call is rather premature.”
Meanwhile, some confused grabbing at straws muddled the picture, when Germany appeared to announce an unlimited guarantee for private savings. According to the British government German Chancellor Angela Merkel had over the weekend specifically rejected any idea of a 100 percent guarantee for savings.
German officials later insisted that such unlimited protection was not the case at all, but that it had given only a vaguely worded “political commitment” that savers would not lose their deposits.
But that kite was already up and flying, with British Chancellor of the Exchequer Alistair Darling pressured into saying that he was “ready to do whatever it takes” and that he was prepared to take “pretty big steps that we wouldn´t take in ordinary times.”
Mr. Darling didn´t say what he was ready to do or how he was ready to do it, and British savers who had watched the German move with initial glee were left disappointed when told their own savings would still be protected only up to $92,500 per account.
Alex Tang, head of research at brokerage firm Core Pacific-Yamaichi in Hong Kong, told the AP, “this credit crunch looks like it´s not going away anytime soon.”
Adrian van Tiggellen, a senior strategist with ING bank in The Hague, was even more succinct:
“There is all-out panic.”
Please read our comment policy before commenting.