VARIOUS/FILE: Uncertainty persists in the markets as Washington fails to agree on bailout plan
- Title: VARIOUS/FILE: Uncertainty persists in the markets as Washington fails to agree on bailout plan
- Date: 27th September 2008
- Summary: (BN09) LONDON, UNITED KINGDOM (SEPTEMBER 26, 2008) (REUTERS) (SOUNDBITE) (English) PAUL CHESTERTON, CMC MARKETS SENIOR SALES TRADER, SAYING: "So the rallies have been very short lived. So everyone is still very pessimistic, but I do worry that we are getting a bit too pessimistic in the short term, you would feel and hope that you can't get some of these prices to press too much more and too many more banks going under before the healthy ones will be the only ones left."
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- Topics: Finance
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- Story Text: Belgian-Dutch financial services group Fortis faces another day of volatile trading and Washington Mutual is bought by JP Morgan Chase.
European stocks fell early on Friday (September 26) led by financials, notably Dutch-Belgian Fortis, as uncertainty persisted over the $700 billion U.S. financial sector bailout plan and U.S. bank Washington Mutual collapsed.
At 0820 GMT the FTSEurofirst 300 index of top European shares was down
6 percent at 1,107.28 points, with banks the leading weighted losers.
Fortis fell 13.4 percent, having dropped to a 14-year low on Thursday (September 25), amid concerns over the group's liquidity, traders said. Fortis credit default swaps widened by 75 basis points to 425 basis points, they said.
KBC Securities in a note attributed Thursday's slide to "unfounded speculation", adding that Fortis did not need a share issue and that "liquidity has never been an issue."
Paul Chesterton, CMC Markets' senior sales trader, said that the ongoing uncertainty targeting certain institutions was not necessarily warranted. "So the rallies have been very short lived. So everyone is still very pessimistic, but I do worry that we are getting a bit too pessimistic in the short term, you would feel and hope that you can't get some of these prices to press too much more and too many more banks going under before the healthy ones will be the only ones left," he said.
Fortis said it would hold a media briefing at 0930 GMT but did not plan to make any fresh announcement.
Banks were the top weighted losers on the FTSEurofirst 300, with Credit Suisse down 5.1 percent, rival Swiss bank UBS 3.7 percent lower and Royal Bank of Scotland down 3.4 percent.
Meanwhile overnight, Washington Mutual was closed by the U.S.
government making it the largest failure for a U.S. bank. Its banking assets were sold to JP Morgan for $1.9 billion ATE Securities in Greece said in a note that the collapse of Washington Mutual, the largest U.S. savings and loan bank, served as a reminder of "the continuation of an unprecedented credit crunch."
U.S. congressional leaders were due to try again on Friday to save the $700 billion Wall Street rescue plan after talks broke down in acrimony on Thursday.
Washington's failure to agree a bailout plan for the U.S. shattered banking system sent global stocks sharply lower on Friday and weakened the dollar, while the crisis put money markets under massive stress.
"This bailout is crucial really.....so everyone is hoping this bailout plan will at least draw a line in the short term, at least of the problem and build a base," explains Chesterton.
Negotiations on the White House plan to buy up toxic assets ran into difficulty after Republicans offered a rival proposal to offer mortgage insurance.
The uncertainty hit stock markets, particularly in the finance sector.
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