Stock markets fall, Iceland suspends trading

Despite shares recovering in early trading today as investors absorbed the news of a half a point percentage cut in interest rates, stock markets this afternoon have fallen as investors fear a world recession.

On Wall Street, shares dipped despite opening 1.63% higher and this resulted in its counterparts losing ground. In London, the FTSE 100 was down 2.34%, France’s Cac 40 shed 2.1%, while Germany’s Dax lost 1.6%.

Investors are fearing the worst after the International Monetary Fund warned that the world economy is teetering on the brink of recession.

Meanwhile, Iceland, which has had a disastrous week after the nationalisation of the country’s three largest banks, has suspended trading on the OMX Nordic Exchange in a bid to prevent further crises. The stock exchange has been closed for trading for two days and is to reopen on Monday.

In the US, Treasury Secretary, Henry Paulson, has warned that despite the US $700 billion (£380 billion) bailout plan, some financial institutions will still collapse.

At a news conference in Washington, Mr Paulson said we will use all of the tools we have been given to maximum effectiveness, including strengthening the capitalisation of financial institutions of every size.

In related news, Chancellor Alistair Darling is off to Washington today to discuss the co-ordinated cutting of interest rates.

Discuss this in the Finance Markets forums

Story link: Stock markets fall, Iceland suspends trading