Uncertainty over the US rescue plan continues to hammer share prices. Europe’s major markets lost over one per cent on Friday. London was down more than 2%.
Banks and commodity stocks suffered most. RBS lost 5.7%, Dexia 8% and Fortis 20%.
Paul Chesterton, CMC Markets’ senior sales trader, said investors are waiting to see what comes out of Washington: “There are a lot of problems still persisting. So the focus is back on again with the financials leading the way down today and clearly we are far from being out of the woods. So everyone is hoping this bailout plan will at least draw a line, in the short term at least, under the problem and build a base.”
With market confidence still in tatters, the European Central Bank, Britain’s Bank of England and the Swiss National Bank are stepping up their efforts to try to calm the situation.
They have pumped billions in short term loans into prime the commercial banking system where nervousness still dominates. Take up from the banks was high
Adding to that nervousness was the news that
a large US bank, Washington Mutual, had been closed by the US authorities and its banking assets sold off to JP Morgan Chase.
The bank is the latest victim of the US housing bust and credit crisis. Its employees await their fate. One said: “Of course we are going to have some uncertainties and some questions about what’s going on. Have I been nervous? Sure. That’s the nature of the whole beast. When a large company gets bought out you worry about your job. Are heads gonna roll, you just don’t know, but we have faith in our bosses upstairs.”
Washington Mutual’s collapse heightened investors concerns about the widening fallout from the credit crisis.