Financial markets in turmoil following Bear Stearns crisis
The global credit crunch saw the collapse of US banking giant, Bear Stearns, over the weekend. The Wall Street bank was bought out by JPMorgan Chase for $2 a share, a fraction of its previous value.
The news raised fears in stock markets around the world with rumours that Lehman Brothers could follow in its footsteps.
Shares in Lehman Brothers fell by over 30% in New York’s pre-opening trading yesterday. It is expected that Lehman will write down a further $1 billion when it posts first-quarter results later today.
Furthermore, banking stocks in London also fell, analysts said Britain’s Big Four banks are also at risk of the credit crunch.
Following the collapse and rescue of Bear Stearns, President Bush sought to stop the global financial crisis spiralling out of control.
In an emergency statement, President Bush said the United States is on top of the situation. We’ve taken strong and decisive action. The Federal Reserve has moved quickly to bring order to the financial market. The Federal Reserve is expected to cut rates sharply again to boost growth.
Mr Bush acknowledged the authorities were dealing with ‘a difficult situation’, but said the world economy would emerge intact.
Sandy Chen of City stockbroker Panmure Gordon said the ‘severity of this current crisis’ was ‘a clear indicator that other firms may be vulnerable’.
David Buik, of City bookmakers Cantor Index BGC partners, said no-one in living memory has ever seen a banking crisis like this since 1929. I have worked in this market for 46 years and the outlook has never looked as bleak.