Fears of a global liquidity crisis are gathering pace, hitting stocks and high-yielding currencies. It comes a day after markets in the US and Europe suffered heavy losses amid fears of a global credit crunch. Asian and Pacific stocks joined US and European jitters over losses in the US home-loan market, while Asian central banks joined a global campaign to calm surging short-term borrowing costs. South Korea’s central bank said it would act if necessary, after central banks in Malaysia, Indonesia and the Philippines intervened to sell dollars to support their currencies. The Reserve Bank of Australia injected more than twice the usual amount of money into the banking system.
The catalyst for the market’s latest skid was Thursday’s announcement by BNP Paribas, France’s largest bank, that it was freezing three of its investment funds, citing volatility in the US sub-prime mortgage sector. The recent collapse of American Home Mortgage, the 10th largest lender in the US, has intensified concerns that the housing crisis could drag down the economy as a whole.