Business | Markets
Bear Stearns roils US and European markets
The emergency funding plan for cash-strapped brokerage Bear Stearns on Friday slammed US and European stocks and boosted bonds already jittery over the impact of a widening credit crunch.
- Reuters
- Published: 00:29 March 15, 2008
New York: The emergency funding plan for cash-strapped brokerage Bear Stearns on Friday slammed US and European stocks and boosted bonds already jittery over the impact of a widening credit crunch.
Shares of Bear Stearns lost nearly half their value and dragged other financial stocks lower with it. Trading overall was volatile as investors tried to absorb the stunning news of the bailout.
The initial announcement that JPMorgan Chase would provide financing to Bear Stearns lifted European shares and index futures, on the view that a white knight had stepped up. But traders then focused on additional statements that the firm's cash position had deteriorated and the Federal Reserve Bank of New York also was part of the funding caused a reassessment.
The Dow industrials, after falling as much as 200 points, traded 138 points lower at 12,000 in late morning dealings.
Unsettled equity investors piled into the relative safety of US Treasuries as equity markets turned sharply lower, which moved to wide gains as interest rates dropped and some speculated the Fed may cut rates more sharply.
In a sign of the fears and hopes gripping markets, major US stock indices opened higher, fell about two per cent and then pared half those losses in the first hour of trading.
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With investors focused on wider risks to the system, the S&P financials index fell 2.8 per cent.
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