That something big was necessary became immediately obvious by the market reaction and the string of bank failures, and subsequent rescues..
It wasn’t supposed to be like this. A deal is announced, and that should have calmed the markets, even sceptic investors like Mark Faber from the Gloom, Boom & Doom newsletter argued for a 15% rally on the S&P after the bail-out would be accepted. We’re off to a flying start. Something is really rotten in the financial world.
- By Michael Patterson and Adria Cimino
- Sept. 29 (Bloomberg) — Stocks around the world tumbled, the euro and the pound plunged and bonds rose as governments raced to prop up banks.
- Europe’s Dow Jones Stoxx 600 Index declined 3.2 percent and the MSCI Asia Pacific Index lost 2.7 percent after Dexia SA sank the most since it began trading 12 years ago and ICICI Bank Ltd. retreated to a two-year low. Futures on the Standard & Poor’s 500 Index fell 1.7 percent as Wachovia Corp. tumbled 91 percent. Citigroup Inc. agreed to buy the company’s banking operations in a transaction the Federal Deposit Insurance Corp. helped arrange.
- The British pound dropped the most against the dollar in 15 years and the euro weakened after European governments stepped in to rescue Bradford & Bingley Plc, Fortis, and Hypo Real Estate Holding AG. The cost of borrowing in euros for three months soared to a record as banks hoarded cash. Commodities fell, led by oil, copper and lead. Investors fled to the safest securities, sending yields on U.S. government notes lower for a second day and European two-year note yields to the lowest in 5 1/2 months.
- “This credit crisis is pretty deep and it’s pretty deep throughout the financial industry,” Jason Pride, director of research at Haverford Trust Co., which oversees about $6.5 billion in Radnor, Pennsylvania, said in a Bloomberg Television interview.
As you see, banks are eve n tumbling like domino’s in Europe. We wrote yesterday already that we were a little sceptic..
If people needed evidence that something was needed they got it now..