Lehman Brothers bankruptcy causes upheaval in markets

| September 15, 2008
Lehman Brothers bankruptcy causes upheaval in markets

European equities markets saw substantial declines Monday as Lehman Brothers (NYSE: LEH) declared bankruptcy after no takeover could be arranged and the US government declined to offer a bailout deal and after Merrill Lynch (NYSE: MER; TYO: 8675) allowed Bank of America (NYSE: BAC; TYO: 8648) to take it over.

In London the FTSE 100 was down 3.92 percent to 5,204.2 while the FTSE 250 dropped 2.99 percent to 8,708.4.

The declines were led by banks, with HBOS (LSE: HBOS) down 17.46 percent and Royal Bank of Scotland (LSE: RBS; NYSE: RBS PRM) falling 12.2 percent, while mortgage lender Bradford & Bingley (LSE: BB) dropped 15.44 percent.

In the rest of Europe, the FTSE Eurofirst 300 was down 3.67 percent to 1,119.47 while the Dax fell 2.74 percent to 6,064.16, the CAC-40 was 3.78 percent lower to 4,168.97, and the IBEX dropped 4.5 percent to 10,899.

While many Asia-Pacific equities markets were closed for holidays Monday, those which remained open fell sharply, also due to the events surrounding the Lehman Brothers bankruptcy.

In Australia, the Sydney Ordinaries fell 1.66 percent to 4,875 while the S&P/ASX200 was down 1.76 percent to 4,817.7.

The Straits Times Index was 3.27 percent lower to 2,486.55 in Singapore while India’s Sensex fell 3.35 percent to 13,531.27 and Taiwan’s Taiex dropped 4.09 percent to 6,052.45.

Tokyo’s markets, as well as those in Hong Kong and the rest of China and in Korea were closed for the day.

Wall Street was down in late afternoon trade, with the Dow Jones Industrial Average 3.55 percent lower to 11, 016.11 while the Nasdaq Composite fell 3 percent to 2, 193.42 and the S&P 500 had dropped 3.73 percent to 1,204.99.

Crude oil prices were down substantially after damage from Hurricane Ike was not as heavy as had been feared, with WTI closing below $96 per barrel, while metals prices were mixed and grains prices were lower.

The Japanese yen and the Swiss franc strengthened as investors sold off their higher-yielding currencies.

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