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World financial crisis

US stocks plunge as fears grip markets

Article published on the 2008-10-06 Latest update 2008-10-07 10:04 TU

A trader reacts on the floor of the US NYSE Monday(Credit: Reuters)

A trader reacts on the floor of the US NYSE Monday
(Credit: Reuters)

US markets plunged Monday at the opening bell in New York, and continued to falter throughout the day. The Dow Jones Industrial Average plummeted below 10,000 points for the first time in four years. US President George W Bush addressed investor fears Monday.

"It's going to take a while to restore confidence in the financial system, but one thing people can be certain of is that the bill I signed is a big step toward solving this problem," said Bush.

Earlier Asia shares tumbled, as doubts that the 700-billion-dollar US bank bailout would prevent a global meltdown. The Paris Cac-40 closed nine per cent down. London and Frankfurt stock markets closed at more than seven per cent down, while Tokyo closed at a new four-year low.

Trading was suspended in Russia after its main index nosedived more than 15 per cent.

Iceland's government late Monday announced it was willing to take control of all the banks in the country. Earlier, its market suspended transactions amid reports that the government was planning  the bailout.

Brazil's stock market was suspended ten minutes after opening Monday as the main index plunged more than ten per cent. Trading resumed half an hour later, but was halted twice as the market dipped more than 15 per cent.

Announcements last night that German bank Hypo Real Estate was receiving a cash injection of 50-billion euros and that French bank BNP Paribas was taking over shares of the Dutch-Belgian bank Fortis were not enough to quell the fears of uneasy investors.

"There's an all-out panic," said Adrian van Tiggelen, ING senior strategist in The Hague. "Everyone had hoped that after the acceptance of the package in the US and bailouts in Europe things would calm down. But... there are still strong fears of the domino effect."

The wavering markets have skewed currency rates and oil prices. The euro fell to a 13-month low of 1.3551 dollars. Oil prices slipped below 90 dollars a barrel.

Financial institutions are also crumbling under pressure.

"Banks face the problem at the moment that they need to finance themselves, and some banks have more urgent funding needs than others," Bank of America's Chief European economist Holger Schmieding told RFI from his London office.

"Those banks that have less need to fund themselves at the moment in the market, of course, have an advantage at the time they are trying to get funding in an almost dysfunctional market," he added.

Analysis: Bank of America's Chief European economist Holger Schmieding in London

06/10/2008 by Susan Owensby