Global markets falter on fear over US financial crisis

Global markets falter on fear over US financial crisis
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First Published: Wed, Jul 16 2008. 03 27 PM IST
Updated: Wed, Jul 16 2008. 03 27 PM IST
London: World stock markets struggled on Wednesday after sharp losses driven by the unfolding US financial crisis and before more testimony from US Federal Reserve chief Ben Bernanke, dealers said.
Bernanke warned of economic gloom on Tuesday and his next comments are awaited anxiously by investors, reeling from the collapse of US bank IndyMac and a rescue for US mortgage-financing firms Fannie Mae and Freddie Mac.
Markets are worried that the deep strains in US finance could spread overseas since foreign investors have large exposure to American home loans, dealers said.
“Goaded by bearish analysts, investors seem to be abandoning American banks in droves,” the New York Times reported on Wednesday.
“While a fraction of the nation’s banks are expected to buckle under their growing burden of bad loans, federal regulators, bank executives and analysts agree that the vast majority of institutions are sound.”
In Europe on Wednesday, London shares fell by 0.27% after slumping on Tuesday to the lowest close since October 2005. Elsewhere, Paris shed 0.17 %, while Frankfurt gained a marginal 0.03%.
In Asia, the picture was also subdued as some investors hunted for bargains amid easing oil prices. Tokyo gained 0.05% and Hong Kong ended 0.23% higher while Shanghai was down 2.39% at the midday stage.
Regarding Bernanke, investors will be “looking for clues and directions in terms of where the US economy might be heading over the next six months, and whether this potential threat of recession is something that they can overcome,” said Hargreaves Lansdown analyst Richard Hunter.
“That clearly is going to have an impact in all sort of different ways for other global markets.”
“The market will still be digesting the comments that he (Bernanke) made yesterday which were obviously extremely cautious,” Hunter added.
Wall Street had finished mainly lower on Tuesday as the leading Dow Jones Industrial Average slumped to a two-year nadir on mounting concern over US financial institutions.
Bernanke was set to appear on Wednesday in the House of Representatives for a second day of testimony on the US central bank’s semiannual economic report.
“The economy continues to face numerous difficulties, including ongoing strains in financial markets, declining house prices, a softening labor market, and rising prices of oil, food, and some other commodities,” Bernanke had said on Tuesday.
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First Published: Wed, Jul 16 2008. 03 27 PM IST