LONDON (AP) – Asian and European stock markets plunged Monday as government bank bailouts in the U.S. and Europe failed to alleviate fears that the global financial crisis would depress world economic growth.
Investors took scant comfort from Washington’s passage on Friday of a (U.S.) $700 billion rescue plan for banks, both because of the uncertainty hanging over the details of the deal and the degree to which it will help. In Europe, more bank bailouts in Germany and Belgium fed investors’ fear.
By midafternoon Europe time, Britain’s benchmark stock index, the FTSE 100, lost 245.70 to 4,734.55 — a 4.93 percent fall. The declines were led by the banking industry, with the mining and oil industries also suffering drops. HBOS PLC’s share price dropped 13.4 percent, while the Royal Bank of Scotland Group PLC fell 14.6 percent.
Germany’s DAX index fell 5.23 percent to 5,493.95. France’s CAC-40 index dropped 5.59 percent to 3,852.63. In Russia, trading in shares was suspended after the RTS stock index fell more than 15 percent. Iceland’s exchange was also closed while the government rushed to draft a plan to deal with the financial turmoil’s impact on its over-leveraged banking sector.
• Wall Street tumbles below 10,000
• Congress: Lehman sought millions for execs
• Fed to loan up to $900 billion to banks
• Kashkari to be tapped to head bailout
European governments have moved to save troubled banks, and are making more promises to protect depositors from the credit crisis.
Germany on Sunday agreed a 50 billion euros (US$68 billion) package to bail out Hypo Real Estate, the country’s second-biggest commercial property lender, after a rescue plan by
private lenders fell apart.
France’s BNP Paribas SA committed to taking a 75-percent stake in troubled European bank Fortis NV, and Sweden and Denmark followed Ireland and Britain in raising the amount of savers’ deposits guaranteed by the government. Germany made a political commitment to insure all private deposits.
Britain’s treasury chief Alistair Darling said he was “ready to do whatever it takes” to get the country through the credit crunch, and was looking at a “range of proposals.”
But analysts said that, like the U.S. plan, the lack of detail in many of Europe’s moves failed to restore investors’ confidence, resulting in the stock market tumbles.
“What the markets need are some more details about exactly when and how these plans are going to come in,” said Richard Hunter, head of British equities at Hargreaves Lansdown Stockbrokers, “And they need some proof that some of these measures are taking hold.”
Across Asia, all markets closed in the red. Tokyo’s Nikkei 225 index fell to its lowest level in 4 1/2 years, sinking 4.25 percent to 10,473.09.
Hong Kong’s Hang Seng index slid 5 percent to 16,803.76. Markets in mainland China, Australia, South Korea, India, Singapore and Thailand also dropped sharply. Indonesia’s key index plummeted 10 percent, it’s biggest one-day drop ever, while the benchmark Shanghai Composite Index sank 3.7 percent to 2,293.78.
Banks and other financial shares saw heavy declines. Shanghai Pudong Development Bank fell by the daily 10 percent limit while Bank of China slipped 4.9 percent.
Shares of Ping An Insurance Co. rose even after it said Monday it will record a US$2.3 billion loss on its stake in European bank Fortis in the biggest blow yet to a Chinese institution from the global credit crisis. Ping An’s shares rose 0.4 percent.
“Everyone is losing confidence,” said Mark Tan, who helps manage about $20 billion of equities and bonds at UOB Asset Management in Singapore. “The problem now is that the lack of foreign confidence could affect the Asian consumer, which would lead to a bigger slowdown in Asia than expected.”
“This credit crunch looks like it’s not going away any time soon,” said Alex Tang, head of research at brokerage Core Pacific-Yamaichi in Hong Kong. “Apart from a credit crunch in Europe, investors are quite concerned about the worsening outlook on the U.S. economy.”
Figures released Friday showed that 159,000 jobs in the U.S. were lost last month, the fastest pace in more than five years.
Such concerns overshadowed any investor optimism over the U.S. House of Representatives’ approval Friday of a massive bailout plan that will allow the U.S. government to buy distressed mortgages and securities backed by mortgages from banks and other financial institutions.
Investors questioned how long it would take for the package to unfreeze credit markets, restore bank lending and generally shore up the U.S. economy.
“The market had already figured in the package’s passage,” said Yukio Takahashi at Shinko Securities Co. in Tokyo. “There are strong doubts about its implementation.”
U.S. stock index futures suggested Wall Street would open lower Monday. The Dow Jones industrial average fell 157.47, or 1.5 percent, to 10,325.38 on Friday.
The euro slid to US$1.3596 from US$1.3774 late Friday. But the dollar was weaker against the yen, falling to 103.25 from 105.30 yen late Friday.
Oil prices tumbled on speculation that slower global growth will cut crude demand. Light, sweet crude for November delivery was down US$3.91 to US$89.97 a barrel in European electronic trading on the New York Mercantile Exchange.