FOURTH YORKSHIREMAN:
Well, when I say 'house' it was only a hole in the ground covered by a sheet of tarpaulin, but it was a house to us.
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GLOBAL MARKETS-U.S. stocks plunge on bailout vote, debt soars
Mon Sep 29, 2008 3:11pm EDT
reuters.com
By Herbert Lash
NEW YORK, Sept 29 (Reuters) - U.S. stocks plunged on Monday after U.S. lawmakers rejected a $700 billion financial system bailout and major U.S. and European banks needed emergency deals to stave off collapse, sending investors fleeing to the safety of gold and debt.
The Dow fell more than 700 points, its biggest intra-day decline on record, as the U.S. House of Representatives rejected a bailout bill. The proposal would have authorized the U.S. Treasury Department to spend up to $700 billion to buy tainted assets from banks.
The bill was defeated by skeptics from both parties who questioned the need for it and whether it would work to jump-start stalled capital markets around the world.
"Complete disaster was predicted if it didn't pass, and it didn't pass. Everybody was expecting it to pass and it didn't pass. I can't see what the upside is right now," said Stephen Berte, senior equity trader at Standard Life in Boston.
The Nasdaq was on course for its biggest one-day slide since markets reopened after the attacks of Sept. 11, 2001.
The plunge in equity markets sparked a rally in government debt, with the 30-year Treasury bond on track for its biggest gain since Sept. 15 when Lehman Brothers Holdings Inc filed for bankruptcy.
"We are in a situation where the market is looking around and saying what else can the government throw at us, and it is not much else right now," said Rudy Narvas, senior analyst at 4cast Ltd in New York.
At 2:30 p.m. (1830 GMT), the Dow Jones industrial average .DJI was down 448.90 points, or 4.03 percent, at 10,694.23. The Standard & Poor's 500 Index .SPX was down 65.26 points, or 5.38 percent, at 1,147.75. The Nasdaq Composite Index .IXIC was down 126.04 points, or 5.77 percent, at 2,057.30.
Before the vote, the euro and sterling tumbled against the dollar and crude oil prices dropped nearly 8 percent to below $99 a barrel on signs the crisis was spreading beyond the United States to Europe and would cut energy demand worldwide.
U.S. and euro-zone government debt soared in one of the biggest rallies for fixed-income securities this year as fears of spreading bank failures overshadowed moves by central banks to pump hundreds of billions of dollars into frozen markets.
Gold briefly jumped 3 percent, and aversion to risk boosted the low-yielding Japanese yen as investors flocked to their safe-havens amid heavy losses in global equity markets. Germany's central bank said it will hold onto the vast bulk of its gold reserves in the next 12 months, which contributed to gold's rise.
The leading index of European shares fell more than 5 percent to a three-and-a-half year closing low. Banking shares weighed on the index amid growing fear about the health of the financial industry on both sides of the Atlantic.
"Investors are fearful, frenetic, especially when it comes to banking shares. They want to get out now and see the after-effects from afar," said Frank Geilfuss, head analyst at Bankhaus Loebbecke.
European authorities were forced over the weekend to rescue a slew of European banks, while U.S. regional bank Wachovia Corp (WB.N: Quote, Profile, Research, Stock Buzz) sold most of its assets to Citigroup (C.N: Quote, Profile, Research, Stock Buzz) in a deal brokered by the Federal Deposit Insurance Corp.
Global money markets remained frozen even as central banks, including the Federal Reserve, pumped $330 billion into world markets in an attempt to boost liquidity.
"We started Monday with more fear than when we left on Friday," said Eric Kuby, chief investment officer of North Star Investment Management Corp in Chicago.
Signs of the potential impact of the financial crisis could be seen in the stock of Apple Inc (AAPL.O: Quote, Profile, Research, Stock Buzz), whose shares fell as much as 17.5 percent on concerns that the maker of the iPod and iPhone will suffer as economic growth slows.
In Europe, the British government took over troubled mortgage lender Bradford & Bingley (BB.L: Quote, Profile, Research, Stock Buzz) and three European governments partially nationalized banking and insurance group Fortis (FOR.BR: Quote, Profile, Research, Stock Buzz)(FOR.AS: Quote, Profile, Research, Stock Buzz). Germany's government threw a lifeline to cash-strapped lender Hypo Real Estate (HRXG.DE: Quote, Profile, Research, Stock Buzz).
The FTSEurofirst 300 index of leading European shares ended down 5.23 percent at 1,047.04 points -- its lowest closing level since January 2005.
The benchmark, down about 27 percent this year, also notched its biggest one-day percentage decline since Jan. 21.
European government bonds surged, pushing the two-year yield to a five-month low.
The benchmark 10-year U.S. Treasury note <US10YT=RR> rose 2-2/32 to yield 3.63 percent, and the 2-year U.S. Treasury note<US2YT=RR> gained 1-8/32 to yield 1.7 percent.
The euro fell nearly 2.0 percent against the U.S. dollar at one point, but later pared losses. Sterling dropped to a 10-day low at $1.7962 <GBP=>, and was last down more than 2 percent at $1.8028, its biggest one-day loss since December 1996.
The euro <EUR=> fell 1.45 percent at $1.4401, while against the yen, the dollar <JPY=> fell more than 1 percent at 104.27.
The U.S. Dollar Index .DXY rose 0.31 percent at 77.528.
MSCI's all country world equity index .MIWD00000PUS plunged 4.7 percent, putting it on track for the biggest one-day loss in at least 20 years.
MSCI's emerging markets stock index .MSCIEF dropped 6 percent while yield spreads widened by 21 basis points to 400 basis points between U.S. Treasuries and emerging market sovereign bonds, indicating low risk appetite.
U.S. light sweet crude oil CLc1 fell $10.52 to $96.38 a barrel, while London Brent crude LCOc1 traded down $9.80 to $93.74 a barrel.
Spot gold prices <XAU=> rose $29.30 to $917.60 an ounce.
Asian stocks fell 2 percent overnight on questions about the effectiveness of the U.S. government plan for the financial system.
Japan's Nikkei share average .N225 declined 1.3 percent and the MSCI index of Asia-Pacific stocks outside Japan .MIAPJ0000PUS fell 2 percent. (Reporting by Kristina Cooke, John Parry, Nick Olivari, Christopher Kaufman and Fank Tang in New York and Naomi Tajitsu, Jane Merriman and Alex Lawler in London and Sarah Marsh in Frankfurt; Writing by Herbert Lash; Editing by Tom Hals) |
