February 11, 2009 2:13 PM
- Text
World Markets Plummet Despite Bailout
(CBS/AP)
Asian markets plunged during Monday trading and European stocks opened on the same downward slope, as global investors took scant comfort from Washington's passage of a $700 billion bank bailout and focused instead on deepening financial turmoil in Europe that threatens to slow global growth.
Japan's stock market sank to its lowest finish in 4 1/2 years as worries about growing fallout from the credit crisis overwhelmed any relief over passage of the U.S. bailout.
The benchmark Nikkei 225 index lost 465.05 points, or 4.25 percent, to close at 10,473.09 - its lowest finish since February 2004.
Traders were spooked by Germany's announcement Sunday of a new bailout package totaling 50 billion euros ($69 billion) for Hypo Real Estate, the country's second-biggest commercial property lender, part of a scramble by European governments to save failing banks.
Adding to European uncertainty, leaders failed to unite at a weekend summit on a joint approach to shore up confidence in the markets - a show of unity pleaded for by French President Nicolas Sarkozy and, before him, U.S. Treasury Secretary Henry Paulson.
Despite her earlier and vocal support for such a pan-European approach, Chancellor Angela Merkel reportedly announced that Germany's government would guarantee at least part of all deposits in the nation's banks.
Ireland was the first to adopt a bold, unilateral approach by guaranteeing all deposits in Irish banks last week. The move frustrated other European leaders, bringing pressure on them to institute similar, costly guarantees - or risk a mass-flight of investors.
CBS News correspondent Richard Roth said the fear gripping European leaders is that a plan to prop up banks in one country could spark a run on banks in the rest of Europe, despite U.S. Treasury chief Henry Paulson's call for coordination to rescue the world economy.
It was unclear Monday morning exactly what Merkel had promised. CBS News partner network Sky News in Britain reported that sources said the German plan was not a full government underwriting of all German deposits.
Britain's treasury issued a statement Monday morning saying it was seeking "further clarification" on Merkel's plan to underwrite German deposits.
"Instead of answering Hank Paulson's request for an international, coordinated approach to match their $700 billion dollar package, actually what you've seen is Europe acting in a complete and utter lack of coordination - cats in a sack is probably a good way to try to describe it," London investment analyst Justin Urquhart Stewart told CBS News.
Alistair Darling, Britain's treasury chief, said during the weekend that he was ready to take "pretty big steps that we wouldn't take in ordinary times" to help the country weather the credit crunch.
Amid the uncertainty, London's FTSE exchange dropped nearly 6 percent during morning trading.
In Austria, shares on the Vienna Stock Exchange plunged 8.4 percent in early trading, and officials said it was the deepest drop since May 2005.
Vienna's benchmark ATK index fell 237.3 points to 2,579.25 at the opening bell. The nosedive at one of Europe's smaller stock exchanges showed how the global economic crisis was rattling markets big and small.
Austria's government has been pressing to increase the mandatory minimum euro20,000 (US$27,545) insurance on bank deposits.
Russia's stock markets also fell precipitously in early trading, with the benchmark index of the RTS exchange down more than 7 percent in the first 20 minutes. The index of the MICEX exchange took an even steeper dive, falling about 10 percent Monday morning before authorities halted trading on the exchange. Russia's markets are shut down when they are deemed to be gaining or losing value at too quick a pace.
A dismal report on the U.S. job market released Friday added to the gloom in Asian markets, fanning worries about U.S. consumer demand for the region's exports.
"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."
"We haven't seen any positive developments in Europe or the U.S., apart from the rescue plan," Tang said. "But even with the rescue plan, investors are focused on the slowing economy."
Investors were processing a series of developments out of Europe over the weekend. Belgian Prime Minister Yves Leterme said Sunday that France's BNP Paribas SA had committed to taking a 75-percent stake in troubled European bank Fortis NV.
The outlook for the U.S. economy worsened after figures released Friday showed that 159,000 jobs in the U.S. were lost last month, the fastest pace in more than five years.
Economists were also predicting many more months of bank failures in the United States, suggesting the $700 billion bailout would help control the losses, but the banking industry enfeebled by huge losses on risky home loans was still on very shaky ground. (Read more analysis of banking industry's blues.)
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 were down more than 1 percent, suggesting Wall Street would open lower Monday morning. The Dow Jones industrial average fell 157.47, or 1.5 percent, to 10,325.38 on Friday.
Meanwhile, oil prices fell to an 8-month low Monday below $90 a barrel on speculation that the spreading financial crisis would exacerbate a global economic slowdown and cut demand for crude oil.
Light, sweet crude for November delivery was down $4.69 to $89.19 a barrel in electronic trading on the New York Mercantile Exchange by late afternoon in Singapore.
Oil prices have tumbled nearly 40 percent since peaking in July.
Japan's stock market sank to its lowest finish in 4 1/2 years as worries about growing fallout from the credit crisis overwhelmed any relief over passage of the U.S. bailout.
The benchmark Nikkei 225 index lost 465.05 points, or 4.25 percent, to close at 10,473.09 - its lowest finish since February 2004.
Traders were spooked by Germany's announcement Sunday of a new bailout package totaling 50 billion euros ($69 billion) for Hypo Real Estate, the country's second-biggest commercial property lender, part of a scramble by European governments to save failing banks.
Adding to European uncertainty, leaders failed to unite at a weekend summit on a joint approach to shore up confidence in the markets - a show of unity pleaded for by French President Nicolas Sarkozy and, before him, U.S. Treasury Secretary Henry Paulson.
Despite her earlier and vocal support for such a pan-European approach, Chancellor Angela Merkel reportedly announced that Germany's government would guarantee at least part of all deposits in the nation's banks.
Ireland was the first to adopt a bold, unilateral approach by guaranteeing all deposits in Irish banks last week. The move frustrated other European leaders, bringing pressure on them to institute similar, costly guarantees - or risk a mass-flight of investors.
CBS News correspondent Richard Roth said the fear gripping European leaders is that a plan to prop up banks in one country could spark a run on banks in the rest of Europe, despite U.S. Treasury chief Henry Paulson's call for coordination to rescue the world economy.
It was unclear Monday morning exactly what Merkel had promised. CBS News partner network Sky News in Britain reported that sources said the German plan was not a full government underwriting of all German deposits.
Britain's treasury issued a statement Monday morning saying it was seeking "further clarification" on Merkel's plan to underwrite German deposits.
"Instead of answering Hank Paulson's request for an international, coordinated approach to match their $700 billion dollar package, actually what you've seen is Europe acting in a complete and utter lack of coordination - cats in a sack is probably a good way to try to describe it," London investment analyst Justin Urquhart Stewart told CBS News.
Alistair Darling, Britain's treasury chief, said during the weekend that he was ready to take "pretty big steps that we wouldn't take in ordinary times" to help the country weather the credit crunch.
Amid the uncertainty, London's FTSE exchange dropped nearly 6 percent during morning trading.
In Austria, shares on the Vienna Stock Exchange plunged 8.4 percent in early trading, and officials said it was the deepest drop since May 2005.
Vienna's benchmark ATK index fell 237.3 points to 2,579.25 at the opening bell. The nosedive at one of Europe's smaller stock exchanges showed how the global economic crisis was rattling markets big and small.
Austria's government has been pressing to increase the mandatory minimum euro20,000 (US$27,545) insurance on bank deposits.
Russia's stock markets also fell precipitously in early trading, with the benchmark index of the RTS exchange down more than 7 percent in the first 20 minutes. The index of the MICEX exchange took an even steeper dive, falling about 10 percent Monday morning before authorities halted trading on the exchange. Russia's markets are shut down when they are deemed to be gaining or losing value at too quick a pace.
A dismal report on the U.S. job market released Friday added to the gloom in Asian markets, fanning worries about U.S. consumer demand for the region's exports.
Hong Kong's Hang Seng index slid 3.4 percent to 17,089. Markets in mainland China, Australia, South Korea, India, Singapore and Thailand also fell sharply. Indonesia's key index plunged more than 5 percent.
"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."
"We haven't seen any positive developments in Europe or the U.S., apart from the rescue plan," Tang said. "But even with the rescue plan, investors are focused on the slowing economy."
Investors were processing a series of developments out of Europe over the weekend. Belgian Prime Minister Yves Leterme said Sunday that France's BNP Paribas SA had committed to taking a 75-percent stake in troubled European bank Fortis NV.
The outlook for the U.S. economy worsened after figures released Friday showed that 159,000 jobs in the U.S. were lost last month, the fastest pace in more than five years.
Economists were also predicting many more months of bank failures in the United States, suggesting the $700 billion bailout would help control the losses, but the banking industry enfeebled by huge losses on risky home loans was still on very shaky ground. (Read more analysis of banking industry's blues.)
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 were down more than 1 percent, suggesting Wall Street would open lower Monday morning. The Dow Jones industrial average fell 157.47, or 1.5 percent, to 10,325.38 on Friday.
Meanwhile, oil prices fell to an 8-month low Monday below $90 a barrel on speculation that the spreading financial crisis would exacerbate a global economic slowdown and cut demand for crude oil.
Light, sweet crude for November delivery was down $4.69 to $89.19 a barrel in electronic trading on the New York Mercantile Exchange by late afternoon in Singapore.
Oil prices have tumbled nearly 40 percent since peaking in July.
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