World Markets Swoon On Wall Street Woes

Stocks In Europe, Asia Take Pounding After Lehman And Merrill Go Down; AIG Fights To Survive

(CBS/AP)  World stock markets swooned again Tuesday as global financial crisis make investors worry that asset prices had yet to hit rock bottom.

At midday, Paris' benchmark CAC-40 index was down 0.5 percent to 4,150.24, Germany's DAX 30 index of blue chips was down 1.04 percent at 6,000.91 and the FTSE-100 share index was 1.3 percent lower at 5,135.90 in London.

Financial stocks across Europe took a pounding for the second day running as news of the collapse of Lehman Brothers and credit downgrades of American International Group Inc., the world's largest insurer stoked investor fears of wider financial and economic damage.

"My guess is that we haven't seen the bottom," said Tony Dolphin, director of economics and asset allocation at Henderson Global Investors in London. The markets "don't feel as panicky as yesterday," Dolphin said, but concerns remain about the crisis extending its reach from the financial sector to the wider economy.

In France, banks and insurers posted some of the steepest stock losses. Natixis lost 7.4 percent and Credit Agricole was down 4.4 percent, while BNP Paribas was 2.14 percent lower and insurer Axa dropped 1.55 percent.

The situation was similar in Germany, where Commerzbank fell 6.35 percent and Deutsche Postbank dropped 4.65 percent.

European central banks pumped billions more in short-term credit into the financial system for a second day to shore up confidence in the aftermath of Lehman Brothers Holdings Inc.'s bankruptcy in the United States.

The European Central Bank, which oversees monetary policy among the 15 countries that use the euro, launched its second one-day refinancing operation in as many days, offering up a 4.25 percent bid rate. On Monday, it added euro30 billion (US$42.5 billion) to money markets though banks had oversubscribed the offer by three times to euro90.3 billion (US$127.8 billion).

In London, the Bank of England provided another 20 billion pounds (euro25.2 billion; US$35.6 billion) in money to markets, four times the amount it pumped in on Monday.

David Buik, a market analyst with BGC Partners in London, told CBS News that the finance industry likely has some more house cleaning to do before investors decide the coast is clear.

"The economy in the U.S. or in Europe, or the U.K. simply cannot recover until such time that the banks are in a position to say they've emptied all the skeletons out of the cupboards... they've written down bad debts, they've shored up their balance sheets with fresh capital, and we're open for business as usual," said Buik. "Until that happens, you going to find a very nervous market."

Terms like 'panic' and 'turmoil' were being used by traders to describe the effects of the post Lehman Brothers shock wave as it smacked into overseas markets, reported CBS News correspondent Mark Phillips.

The collapse of the U.S. giant may have pushed all the global exchanges down, but bank stocks were punished particularly hard, said Phillips, who added that another phrase making the rounds Monday was that financial institutions were experiencing "a crisis of confidence that could be catastrophic."

The events of last few days, with Lehman Brothers' bankruptcy, Merrill Lynch & Co's sale to Bank of America Corp. and now AIG's downgrades will have two macroeconomic effects, Dolphin said. "It will extend the credit crunch, and maybe more importantly, it's another blow for business confidence," Dolphin said.

Asian stock markets plummeted Tuesday, playing catch-up with other markets around the world after a holiday Monday kept Tokyo and Hong Kong markets closed on the day Wall Street's landscape was dramatically changed.

"Today was a bloodbath," said Alex Tang, head of research at Core Pacific-Yamaichi, who noted that trading volume was its highest in months. "This was panic selling ... They are dumping shares, they just want to liquidate their positions."

To ensure liquidity, Japan's central bank on Tuesday injected of 2.5 trillion yen (US$24 billion) into money markets and issued a statement vowing to take measures to maintain stability in the country's financial markets.

Despite a flurry of last-minute negotiations over the weekend, storied New York investment bank Lehman Brothers was unable to find an investment partner to throw it a lifeline amid US$60 billion in soured real-estate holdings. Investors were further shaken by equally stunning news that Merrill Lynch, one of the world's most famous brokerages, sought to avoid a similar fate with a US$50 billion transaction to become part of Bank of America Corp.

The crisis appeared to be far from over. AIG, the world's largest insurer, was fighting for survival after downgrades from major credit rating firms, adding pressure as AIG seeks billions of dollars to strengthen its balance sheet.

On Wall Street Monday, the Dow Jones industrial average fell more than 500 points, or 4.4 percent, to 10,917.51 - its worst point drop since after the September 11, 2001, terror attacks.

U.S. stock futures were down modestly, suggesting Wall Street could fall further Tuesday.

[cheer_lead91]

I''m not going to lie - I think that President Bush has done a pretty good job. It''s impossible to have a perfect president or one that everyone likes. Given the resources Bush had, I''m sure he did his best. Yet I think it''s quite a dramatic overstatement to say that "our economy couldn%u2019t be better" or that "Bush should be president another 8 years." Not that I have anything against him, but that just wouldn''t work, even if it was possible. Our country needs and desires a change, especially if anyone''s been paying attention to the latest news on the stock market.

[polar_bear3]

GOD BLESS AMERICA!!!
UNCLE SAM, when you have a SH%$T my friend please do it properly and don%u2019t miss a loo. Read manual if you can%u2019t remember how to use it. We smell your dogs excrements 10000 miles from you, you poor old cripple%u2026..LOL hahahaha

[bobnjersey]

[American liberals today, seem to echo the beliefs of Adolf Hitler.
Sieg Heil, Sieg Heil to the American liberals]
[Posted by dmcfee1 at 03:56 PM : Sep 16, 2008]

there you go ... you win the goodwin''s law prize for this thread.

[raskal_2]

... it is not over folks, this is why the FED is keeping the powder dry. Think Morgan Stanley...

[mcv57]

The economy in the U.S. or in Europe, or the U.K. simply cannot recover until such time that the banks are in a position to say they''ve emptied all the skeletons out of the cupboards.

David Buik, Market analyst, BGC Partners

Mr. Buik are you trying to distract the public. Dumba*ss, the Federal Reserve runs ALL the banks ... the board members job is to hide and cook the books until the financial market can absorb the reality. Otherwise, the whole dam*n market will crash.

It''s a very wise move by the FEDS - TAKE A SLOW AND PAINFUL DUMP. Paulson''s predictable move to shield AIG was clear as night and day - all its effort to back Fannie Mae & Ray would have been futile.

[bobnjersey]

[All of you are forgetting that Clinton removed the wall between Banks, Insurers and Security Firms. This is the results of that action.]
[Posted by dmw1167 at 01:35 PM : Sep 16, 2008]

did he do it all by himself when nobody else was looking? who controlled congress when this bill was authored and signed? who sponsored the bill?

all the answers begin w/ the letter ''r''.

nice try though?

[ajaxtheleast]

IT''S BEEN CLEARED UP !!

Obama COULDN''T have been refering to

a repub putting lipstick on a pig.

For be it on a pig or on their stallmate

repubs put lipstick on the OTHER end.

[infe5]

@ dinkydog1,

Jaxsterling5 may have meant an increase on capital gains taxes, which means any profit you make from the selling of stocks would be subject to increased tax rates. This could lead to less investment in the stock market depending on how that affects the general rate of return for an average investor.

[dinkydog1]

A 4% drop in the stock market is nothing compared to Obama taxing the stock market and the thousands of small businesses. I work for a business , do you? You wont after Obama. Obama will make us unsafe and put us into a depression.


Posted by jaxsterling5 at 10:43 AM : Sep 16, 2008

........................

Ok, how is Obama going to tax the stock market? Do you just make this stuff up?

[gangesdak]

what is the make of the car you drive?
anyone?
Posted by ncvoter2 at 10:50 AM : Sep 16,

Chevy Cobalt- 29.5/36.0 mpg. No SUV for me.
Why

[dredre2k]

"Lehman Brothers hired Jeb bush in 2007. 1 year later they are broke. Sound familiar?" - getoffmine

Really? Why am I not surprised? If Jeb was an employee, I would have figured that the gov''t would step in to save Lehman, since bush & co have interests in the company. Jeb is now working with the McCain campaign... he does know how to rig an election that Jebediah!

Can''t wait til this nightmare presidency is over!
Anyone else throwing a big party when bush is out?
;-D

[dredre2k]

America''s been taking a "pounding" ever since bush has been in office. It is only appropriate that the rest of the world get its turn.

[ncvoter2]

what is the make of the car you drive?
anyone?

[ncvoter2]

what is the make of the car you drive?

[ncvoter2]

what is themake of the car you drice?

[jab232]

Welcome to the outcome of Gramm-Leach-Bliley, the act which repealed safeguards in place since 1929. That repeal set the stage for this meltdown. McCain''s economic adviser (now in hiding) Phil Gramm was a main sponsor of the bill, and John McCain voted for it. As a lobbyist, Gramm worked successfully to short circuit the congress when it tried to put some reasonable regulation back in. When President McCain appoints his commission to investigate the cause of this financial collapse, they will have to investigate Phil Gramm and John McCain.

[jab232]

Welcome to the outcome of Gramm-Leach-Bliley, the act which repealed safeguards in place since 1929. That repeal set the stage for this meltdown. McCain''s economic adviser (now in hiding) Phil Gramm was a main sponsor of the bill, and John McCain voted for it. As a lobbyist, Gramm worked successfully to short circuit the congress when it tried to put some reasonable regulation back in. When President McCain appoints his commission to investigate the cause of this financial collapse, they will have to investigate Phil Gramm and John McCain.

[ncvoter2]

it''''''''s funny how people overextend their credit so far that they can''''''''t pay it back,
Posted by ncvoter2 at 10:02 AM : Sep 16, 2008

Starting with Bush & co. Look at the national debt ...


--------------------------------------------------------------------------------

Posted by abbe91 at 10:10 AM : Sep 16, 2008
just like a liberal- take part of a statement and put it completely out of context.

[abbe91]

it''''s funny how people overextend their credit so far that they can''''t pay it back,
Posted by ncvoter2 at 10:02 AM : Sep 16, 2008

Starting with Bush & co. Look at the national debt ...

[abbe91]

"Is the 9% approval LIB congress back from vacation yet?
Posted by pmsnbc1 at 10:01 AM : Sep 16, 2008"

Depends ... is Bush back from Crawford with his veto pen ? Talking about taking vacation ...