No bloodbath but stockmarket trading was definitely edgy around the world.
Asia and Europe fell, gold rallied, then eased, as did oil. The Dow ended higher after swinging through a 200 point range all day. The broader Standard & Poor’s 500 fell, reflecting the overall tone while NASDAQ was also lower.
Figures from the Federal Reserve showed US industrial production was down more than expected, adding to expectations of a big rate early tomorrow morning, Australian time.
The bailout and sale of Bear Stearns, and the Fed’s other moves to try and settle markets, continued to rattle confidence.
Yields on US Treasury bonds dropped by around 0.13% to 3.1% for the 10 year bond, compared to 3.44% on Friday as investors went for cash.
So desperate were investors for safety that the bid the yield on three month US T-notes down to 0.635% at one stage, a level not seen since the 1950’s. They finished at 1%. Yields on two year bond fell to five year lows of 1.35%.
Dealers used words like ‘fear’ and ‘panic’ to describe the activity in the US treasuries markets. they said a shortage of Treasury securities was helping drive down yields and drive up spreads between short term and longer term notes, and between Treasuries and corporate debts.
This in turn is making banks more reluctant to lend.
That cashing up hit all markets and commodities fell across the board with metals and agriculturals lower. The desire for cash trimmed the early gains in oil (over $US111 a barrel, and gold). Oil finished off more than $US4 a barrel at just over $US105.60.
The US dollar hit a 13-year low against the yen and another all-time low against the euro.
The Dow added 0.18% or 21 points, the S&P 500 lost 0.9%, and NASDAQ fell 1.6%. The futures market shows our market opening about square, as traders took their lead from the Dow and not from the other indices.
Stocks swung sharply, especially in afternoon trading, going from 159 points in the red to a small gain in the space of less than an hour.
Bear Stearns shares sank 85% to less than $US4 a share on Monday (JP Morgan has paid $US2 in shares) JPMorgan Chase shares jumped 8.8%.
Federal regulators accelerated the Bear deal-approval process and the Federal Reserve provided $30 billion in funding, the latest in the central bank’s series of drastic steps to protect the financial markets amid the housing and credit crises.
Also on Sunday, the Fed cut the discount rate to 3.25% from 3.5%, as a means of making more cash available to strapped banks. The move occurred just two days ahead of the Fed’s regularly scheduled interest rate meeting tonight, our time.
Traders are tipping a cut of a full 1%. Half that would disappoint markets.
As investors wondered which company would be next to face a fate similar to that of Bear Stearns, speculation turned to Lehman Brothers. Lehman shares plunged 23%. They were much more in early trading. Lehman Bros are due to report quarterly earnings this week.
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Volatility spilled into commodities on Monday, with oil soaring to fresh highs above $US111 dollars a barrel and gold jumping to new heights beyond $US1,032 dollars an ounce as investors sought a safehaven from the storm.
In Europe, in London the FTSE 100 index of leading shares shed 3.86%, in Paris the CAC 40 fell 3.51% and in Frankfurt the Dax lost 4.18%.
Rumours of more troubled financial institutions went through markets, with shares in MF Global, a US-listed brokerage and investment firm that was formerly part of Britain’s MAN Group, shedding more than 65% on speculation its customers were pulling out funds.
The DJ Euro Stoxx 50 index of leading eurozone shares was down 3.55% at the close, its lowest level since the middle of 2005.Europe’s Dow Jones Stoxx 600 Index sank 4.3% and the MSCI Asia Pacific Index tumbled 2.7%.
Tokyo stocks plunged by 3.7%, ending below the key 12,000 points level for the first time since August 2005.
Mumbai fell a sharp 6.03%, Hong Kong shed 5.2%, Seoul 1.6% and Sydney was off 2.3%.
In Australia the market fell sharply to its lowest close in 18 months with around $27 billion wiped off the value of the local market in the wake of the events in the US.
The market had been down over 3% during the day, before recovering slightly before the close. The ASX200 index tumbled 119.9 points, or 2.3%, to 5087, the lowest close since September 26, 2006.
The All Ordinaries fell 115.3 points, or 2.18%, to 5173.2.
Commonwealth Bank fell $2.42, or 6.08%, to $37.35, the ANZ Bank lost $1.06, or 4.91%, to $20.54 and Westpac shed 69 cents, or 3%, to $22.31. The National Australia Bank lost 81 cents, or 2.93%, to $26.85.
Suncorp-Metway dropped 35 cents to $11.55, AXA Asia Pacific 22 cents, or 4.24%, to $4.97 and QBE fell 91 cents, or 4.25%, to $20.00.
Gold miners were amongst few winners today, with Lihir up 19 cents, or 4.55%, to $4.37, Newmont Mining 14 cents to $5.78 and Newcrest Mining rising 99 cents to $38.70.
Other resource stocks were mixed with BHP Billiton lost 42 cents to $37.50 and Rio Tinto shed $3.80 to $127.00.
Property management companies were also weak with Westfield falling 65 cents, or 3.77%, to $16.58, Goodman Group dropping 32 cents, or 8.14%, to $3.61 and Mirvac losing 17 cents to $3.53.
Chinese shares tumbled 4.6% to their lowest level since last July.
It was the biggest fall in almost two months and came after a 10% drop last week, the biggest on record.
The CSI 300 Index fell 4.6% to 3,965.28 at the close. It was the first time the benchmark has closed below 4,000 points since July 19.
Hong Kong’s Hang Seng Index fell 5.2% to 21,084.61 at the close, the lowest since August 17.
The Hang Seng China Enterprises Index, which covers
