Stocks slide as Germany moves to shore up bank confidence
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Germany guaranteed all bank savings and stepped in with the biggest bank rescue in the country's history, as the world financial crisis showed no sign of easing.
The massive US bailout package did little to calm investor nerves, with major Asian stock markets again dropping sharply Monday as the turmoil that has gripped Wall Street took firm hold in Europe.
European stock markets plummetted shortly after the start of trading on Monday, losing around five percent.
After slumping five percent, London's FTSE 100 showed a loss of 3.92 percent at 4,787.00 points. Frankfurt's DAX 30 was down 4.50 percent and the Paris CAC 40 slumped 4.30 percent, following sharp losses across Asian equity markets.
Stock prices on Russia's two main markets, the RTS and MICEX, also plunged at the start of trading.
Within 40 minutes of opening, the benchmark index on the dollar-denominated RTS had slumped by 8.80 percent to 976.74 points, while its ruble counterpart on the MICEX was down 11.83 percent at 815.13.
Stocks also plunged across the Nordic region in opening trading, with the Oslo exchange dropping almost 7.0 percent while the Swedish stock exchange was down by 4.62 percent, Helsinki by 4.88 percent and Copenhagen by 5.87 percent.
The German government agreed an emergency rescue package of 50 billion euros, or 68 billion dollars, for Hypo Real Estate (HPE), the country's fourth-largest bank, late on Sunday before markets opened in Asia.
On Monday German Finance Minister Peer Steinbrueck said he would not rule out an increase in a state-backed guarantee for HRE.
HRE hailed the bailout, which it said would allow it to keep functioning amidst the ongoing financial crisis.
"We are very thankful for the backing of all those involved," HRE boss Georg Funke said in a statement.
"The solution guarantees the stability of the Hypo Real Estate Group, which will have enough liqudity and will be able to continue functioning even as the financial crisis continues," Funke added.
Meanwhile the turmoil continued to take its toll on shares in Asia in early trade.
Japanese share prices dropped 4.6 percent to a four-year low in afternoon trade, Hong Kong was off 3.4 percent at the midday break and Australia lost 3.2 percent in the morning session.
Japan's central bank on Monday injected another one trillion yen ($9.5 billion) into Tokyo's short-term money market, the 14th straight business day that it has poured emergency funds into the financial system.
The current crisis has its roots in a wave of loans to would-be US homebuyers with spotty credit histories. Once people began to default on these so-called subprime mortgages, a chain reaction of chaos ensued.
Housing foreclosures sent home values plunging, and the US housing market fell apart. Meanwhile the loans themselves had been re-packaged as complicated investment products and resold.
As bank after bank realised the extent of its investment in these bad debts, they saw they had less money available to make new loans while their own share prices began to collapse -- and the global meltdown began.
Under a US rescue plan passed on Friday, the government will buy up to $700 billion of bad mortgage-related assets from banks, wiping the debts from their books and freeing them up to start lending robustly again.
The turmoil has led to the biggest reorganisation of the US financial industry since the Depression, with some of the biggest names in US banking going under or being bought out as institutions scramble for cash to stay afloat.
Wells Fargo announced late Sunday that an appeals court had struck down a bar to its acquisition of Wachovia, a takeover that would give it the biggest network of branch offices in the United States.
Wachovia had earlier agreed in principle to a US-government backed deal with Citigroup. Some analysts have suggested the loss of the deal would leave question marks over the solidity of Citigroup's finances.
French Bank BNP Paribas agreed on Sunday to take control of ailing finance group Fortis's operations in Belgium and Luxembourg through a share issue, saying the operation valued the company at 14.7 billion euros.
The Belgian and Luxembourg governments had partially nationalised the bank a week ago, but after the Dutch government took over full control of Fortis operations in the Netherlands, they began looking for a suitor.
The massive US bailout package did little to calm investor nerves, with major Asian stock markets again dropping sharply Monday as the turmoil that has gripped Wall Street took firm hold in Europe.
European stock markets plummetted shortly after the start of trading on Monday, losing around five percent.
After slumping five percent, London's FTSE 100 showed a loss of 3.92 percent at 4,787.00 points. Frankfurt's DAX 30 was down 4.50 percent and the Paris CAC 40 slumped 4.30 percent, following sharp losses across Asian equity markets.
Stock prices on Russia's two main markets, the RTS and MICEX, also plunged at the start of trading.
Within 40 minutes of opening, the benchmark index on the dollar-denominated RTS had slumped by 8.80 percent to 976.74 points, while its ruble counterpart on the MICEX was down 11.83 percent at 815.13.
Stocks also plunged across the Nordic region in opening trading, with the Oslo exchange dropping almost 7.0 percent while the Swedish stock exchange was down by 4.62 percent, Helsinki by 4.88 percent and Copenhagen by 5.87 percent.
The German government agreed an emergency rescue package of 50 billion euros, or 68 billion dollars, for Hypo Real Estate (HPE), the country's fourth-largest bank, late on Sunday before markets opened in Asia.
On Monday German Finance Minister Peer Steinbrueck said he would not rule out an increase in a state-backed guarantee for HRE.
HRE hailed the bailout, which it said would allow it to keep functioning amidst the ongoing financial crisis.
"We are very thankful for the backing of all those involved," HRE boss Georg Funke said in a statement.
"The solution guarantees the stability of the Hypo Real Estate Group, which will have enough liqudity and will be able to continue functioning even as the financial crisis continues," Funke added.
Meanwhile the turmoil continued to take its toll on shares in Asia in early trade.
Japanese share prices dropped 4.6 percent to a four-year low in afternoon trade, Hong Kong was off 3.4 percent at the midday break and Australia lost 3.2 percent in the morning session.
Japan's central bank on Monday injected another one trillion yen ($9.5 billion) into Tokyo's short-term money market, the 14th straight business day that it has poured emergency funds into the financial system.
The current crisis has its roots in a wave of loans to would-be US homebuyers with spotty credit histories. Once people began to default on these so-called subprime mortgages, a chain reaction of chaos ensued.
Housing foreclosures sent home values plunging, and the US housing market fell apart. Meanwhile the loans themselves had been re-packaged as complicated investment products and resold.
As bank after bank realised the extent of its investment in these bad debts, they saw they had less money available to make new loans while their own share prices began to collapse -- and the global meltdown began.
Under a US rescue plan passed on Friday, the government will buy up to $700 billion of bad mortgage-related assets from banks, wiping the debts from their books and freeing them up to start lending robustly again.
The turmoil has led to the biggest reorganisation of the US financial industry since the Depression, with some of the biggest names in US banking going under or being bought out as institutions scramble for cash to stay afloat.
Wells Fargo announced late Sunday that an appeals court had struck down a bar to its acquisition of Wachovia, a takeover that would give it the biggest network of branch offices in the United States.
Wachovia had earlier agreed in principle to a US-government backed deal with Citigroup. Some analysts have suggested the loss of the deal would leave question marks over the solidity of Citigroup's finances.
French Bank BNP Paribas agreed on Sunday to take control of ailing finance group Fortis's operations in Belgium and Luxembourg through a share issue, saying the operation valued the company at 14.7 billion euros.
The Belgian and Luxembourg governments had partially nationalised the bank a week ago, but after the Dutch government took over full control of Fortis operations in the Netherlands, they began looking for a suitor.
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