European and Asian stocks hit by Bear Stearns shock

London: Stock markets in Europe and Asia markets plunged on Monday, oil soared and the dollar sank amid fears the end of the credit crisis has not yet been reached in the wake of JPMorgan Chase's acquisition of troubled US investment bank Bear Stearns.

Oil prices hit a record in Asian trading and US stock index futures fell sharply, suggesting Wall Street would take further hits after sinking on Friday. European shares also opened lower.

JPMorgan said on Sunday it would acquire Bear Stearns for $236.2 million - or $2 a share - in a deal that represents a stunning collapse for one of the world's largest and most venerable investment banks.

European stocks fell in morning trading. The UK's benchmark FTSE 100 dipped 2.3 per cent to 5,503.6 while France's CAC 40 slid 2.7 per cent to 4,468.28. Germany's DAX slipped 3.3 per cent. Financials were especially hard hit, with Switzerland's UBS down nine per cent.

"Its difficult to call where the bottom is," said Richard Hunter, a broker at Hargreaves Lansdown in London. "The banks getting hit are those perceived to have exposure to the US subprime market."

"There is persistent credit uncertainty. Market players have been repeatedly let down which shows the subprime mortgage problems are so deep-rooted," said Atsuji Ohara, global strategist of Shinko Securities in Tokyo.

"Just buying an investment bank does not solve the problem," he said. "Markets are prodding [the US government] to inject public funds."

Investors stunned

News of the acquisition of Bear Stearns stunned investors just before markets opened in Tokyo and Seoul. Both fell sharply before paring some losses in afternoon trading.

Japan's benchmark 225 index sank 3.7 per cent to close at 11,787.51, its lowest in more than two years. Hong Kong's Hang Seng index fell 5.2 per cent to finish at 21,084.61.

Across the Asia-Pacific region, all major stock indexes were down, including markets in Australia, China, South Korea, Indonesia and the Philippines. India's Sensex also dropped.

"We are worried" about what comes next, Shim Jae-youb, a strategist at Meritz Securities in Seoul, said of concerns that other banks may collapse.

Shim said investors were on guard ahead of the release of quarterly earnings reports from big US investment banks this week, including Lehman Brothers Holdings, Goldman Sachs Group, and Morgan Stanley. Bear Stearns had been scheduled to report its results yesterday, though it wasn't clear if it would go ahead with that plan.

In currency trading, the dollar plunged as low as 95.72 yen - its lowest since August 1995 - dragged down by a gloomy outlook for the American economy and prospects for lower interest rates. The euro rose to a record high $1.5903.

Japanese officials quickly called for calm in the currency markets, but did not announce any plans for intervention to shore up the greenback by buying up dollars.

Oil prices, meanwhile, hit an all-time trading high in Asia as the greenback's tumble and the decline in stock markets prompted investors to seek shelter in commodities such as oil.