Stock markets are again under the US subprime’s vicious gloom as credit crunch creates panic among the investors.
Beset by credit crisis in the global financial markets and tumbling house prices across the country are affecting the stock markets and inundating the profits of financial sectors. Bigger banks are worse affected from it.
The index fell to 105.0 from 119.5 in July; a drop that triggered renewed selling on Wall Street. The Dow Jones Industrial Average fell 280.3, or 2.1 per cent, to 13,041.9, which is a biggest fall since 9 August, while the FTSE 100, too, headed lower, closing in London down 117.9 at 6,102.2. In Paris, the Cac 40 fell 2.1% or 116.4 points to close at 5,474.2.
In the financial sector loses, big banking components like Bear Stearns, Lehman Brothers and Citigroup are the worse affected and jolted from the liquidity conjunctions. These banks have lowered their profit forecasts.
It’s not only western stock markets, who affected by the credit crunch, but volatility also experienced in the budding Asian markets. While trading, share prices in Japan fell 2.5%, and the fall was made worse by the strengthening of the yen, as companies which rely on exports saw their shares drop. The Hong Kong and Singapore indexes both fell by more than 2%.
Market disappointed after the transcript of the last Federal Reserve meeting on august 7, which failed to give any hope to investors as they remained primarily worried about inflation and not weighing interest rate cut as a measure. In the transcript the committee’s members acknowledges the problem in financial markets, which needs expedite measures, but failed to suggest the solution.
The whole financial crunch is generated by the sub-prime mortgage industry, which handed home loans to millions of low-income Americans, who are now struggling to keep up the repayments. Subprime crises have accelerated more than expectations and Policy makers are in doldrums to control it. Rate cuts can provide an immediate relief, but inflation worries deter fed to lower it.
Via: BBC
