Global shares hit as banking crisis bites in Europe
Written on September 29, 2008
European shares fell heavily on Monday as fallout from the credit crisis hit the region’s banking sector, forcing partial nationalization of two banks and leaving investors to ponder the impact of a U.S. bailout plan.
The euro and sterling fell in the wake of share prices sliding, while safe-haven government bond prices rose.
Money markets remained frozen with banks refusing to lend to one another for all but the shortest periods, prompting the European Central Bank to offer additional funds.
The hard-fought U.S. proposal to establish a $700 billion fund to buy illiquid securities will be sent for a Congressional vote later on Monday after days of tense negotiations and compromises.
But European worries threatened to overshadow the proposal after the Belgian, Dutch and Luxembourg governments were forced to rescue financial firm Fortis over the weekend to prevent a domino-like spread of failure no qualifying payday advance.
In addition, the UK government said that lender Bradford & Bingley’s branch network will be sold to Spanish bank Santander and the remainder of the group would be nationalized.
“The nationalizations have an incredibly negative read across for the sector,” said Mark Sartori, head of European sales trading at Fox-Pitt, Kelton.
“The contagion is spreading to mainland Europe and everyone’s asking: who’s next?” he added.
Filed in: economics.