Asia Crash!
The Nikkei 225 Average fell 6.2% to 8725.75 in late trading, after rising for three straight sessions, and the broader Topix index gave up 5.9% to 900.4. South Korea's Kospi dropped 6.8% to 1114.59, Australia's S&P/ASX 200 shed 3.4% to 4156.10, Hong Kong's Hang Seng Index was 2.86% lower at 14610.49 and Shanghai's Composite Index was down 2% at 1919.18.
FTSE 100 was down 182.62 points, or 4.3%
The FTSE 100 was down 182.62 points, or 4.3%, to 4047.11 in midday trading, erasing the week's earlier gains.
The slide in stocks was accompanied by a dramatic fall in the value of the pound, after Bank governor Mervyn King told business leaders last night that it was likely the UK is going into a recession. He also said that the country is in the midst of the worst financial crisis in living memory, and the road to recovery will be a long and slow one.
Copper tumbled below $2 a pound for the first time since December 2005 amid speculation the world economy is headed for a recession that will reduce demand.
Banks share fell again, led by Royal Bank of Scotland, which slumped 13pc to 69.2p, and Standard Chartered dropped 8.1p% to 953p.
Mining shares were also among the biggest fallers, as metals prices dropped on the expectation a global slowdown in manufacturing will hurt demand.
Copper miner Kazakhmys fell 10% to 273.75p and Anglo-Australian commodities giant BHP Billiton lost 8.2% to 888p. Xstrata also declined 8% to 985p.
Demand worries also sent the price of oil down below $70 a barrel again. Crude was down 2.3 to $69.41 in New York at lunchtime. That sent shares of BP down 3.6%. The CAC in Paris was down 3.7%, while the DAX in Germany fell 2.9%.
Wachovia Severes $23.7 Billion Loss
According to Bloomberg, Wachovia Corp., the bank being acquired by Wells Fargo & Co., reported a record quarterly loss as mortgage markets crumbled and business customers withdrew a fourth of their deposits.
The third-quarter loss was $23.9 billion. The loss included an $18.7 billion impairment charge that reflected lower market values and terms of the Wells Fargo transaction. San Francisco-based Wells Fargo anticipated the writedowns and charges in making the purchase, Wells Fargo Chief Financial Officer Howard Atkins said in the statement. Writing down the value of Wachovia's past acquisitions won't affect Wells Fargo's plan to raise $20 billion, he said.
Wells Fargo said it expects $74 billion in losses and writedowns from Wachovia's $498 billion portfolio, including $32 billion in option-adjustable-rate mortgages and $24 billion in commercial loans. It plans to offset the markdowns by raising the $20 billion by selling shares and by cutting $5 billion in annual expenses.
Investors' losses up to 90% of $1.2 trillion CDO as the failures of Lehman
According to Bloomberg, Investors are taking losses of up to 90 percent in the $1.2 trillion market for collateralized debt obligations tied to corporate credit as the failures of Lehman Brothers Holdings Inc. and Icelandic banks send shockwaves through the global financial system.
The losses among banks, insurers and money managers may spark the next round of writedowns on CDOs after $660 billion in subprime-related losses. They may force lenders to post more reserves against losses after governments worldwide announced $3 trillion in financial-industry rescue packages since last month, according to Barclays Capital.
The collapse of Lehman Brothers, Washington Mutual Inc. and the three banks in Iceland prompted Susquehanna Bancshares Inc., a Lititz, Pennsylvania-based lender, to lower the value of $20 million in so-called synthetic CDOs by almost 88 percent last week.
Some synthetic CDOs, tied to credit-default swaps on corporate bonds, are trading at less than 10 cents on the dollar now. About $254 billion of CDOs tied to mortgages for borrowers with poor credit histories have defaulted. Downgrades of corporate CDOs will force investors to boost capital, according to an Oct. 17 report from Barclays Capital analysts.
Fitch downgraded 422 classes of CDOs on Oct. 13 after seven financial companies defaulted or were bailed out since September. The company didn't disclose the total number of classes it rated. The downgrades force payment of the credit-default swaps packaged in the debt, causing losses for investors or eroding capital.
Hungary raises the benchmark rate by 3% points to boost its currency
Hungary raised its benchmark interest rate by 3 percentage points in emergency interest rate hike to stabilize the country's currency, hurt by the financial crisis, raising the possibility that other countries in the region could follow its lead. According to Bloomberg, it's the biggest increase in five years.
``The forint remains under extremely strong speculative pressure,'' Prime Minister Gyurcsany told reporters in Budapest today. ``The government will intervene if that becomes necessary to protect the Hungarian economy.' Hungary is scrambling to shield its markets from being engulfed by the global financial crisis that erased more than $25 billion from equities in 2008. Central banks from London and Frankfurt to Washington and Hong Kong two weeks ago reduced interest rates after yearlong credit-market seizure stoked concern banks will run short of money.
The increase is an ``extreme decision'' that may backfire and further damage prospects for economic growth, said Bartosz Pawlowski, an economist at Toronto Dominion Bank in London. He said emerging market currencies were weakening today across the board and may not be linked to interest rate levels.
Related Posts :
- Lehman's CDS settlement has been success
- Iceland receives $6 bln rescue package
- Nouriel Roubini: How to prevent contagion effects of the financial crisis in Hungary
- US stocks opened lower, Canada tumbled 3%, Bank of Canada cuts key rate by 25bp
- Bloomberg: Wachovia Loses $23.9 Billion on Real-Estate Charges (Update2), October 22, 2008 10:00 EDT
- The Wall Street Journal: Nikkei's 6.8% Fall Leads Asia Lower, October 22, 2008 6:15 A.M. ET
- Bloomberg: CDO Cuts Show $1 Trillion Corporate-Debt Bets Toxic (Update1), October 22, 2008 05:28 EDT
- Bloomberg: Hungary Raises Benchmark Rate to Defend Its Currency (Update3), October 22, 2008 09:13 EDT
- Telegraph.co.uk: FTSE declines on recession fears, commodities, October 22, 2008 03:39PM BST
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