Dow Plunges Nearly 400 Points; U.S. Subprime Mess Spills Over to Europe
Negative news from the French bank BNP Paribas sent the markets
reeling today. Following the news, the major averages traded well
below the unchanged line all day, with the exception of the Nasdaq,
which briefly turned positive before it plunged back into negative
territory.
In a statement released this morning French bank BNB Paribas
announced they were forced to suspend three funds worth a total of
$2.75 billion in USD. The bank said that the “complete evaporation
of liquidity” in areas of the U.S. lending market was the culprit
behind the freezing of the funds.
BNB Paribas, the largest publicly held bank in France, stated that
the decision to temporarily suspend was due to “exceptional
times,” however they would re-open the funds as soon as liquidity
returns to the market. In an attempt to steady the financial
markets and to inject liquidity, the European Central Bank took
the highly unusual step of making available more than $130 billion
in overnight funds at a low rate of 4 percent.
Crude oil futures for September delivery fell
0.8% to $71.59 a barrel on concerns that reduced economic growth
will hamper fuel demand. Gold futures for December
delivery dropped 2% to $672.80 an ounce as investors sold
precious metals for cash to cover losses related to the U.S. subprime mortgage collapse.
Around Europe, France’s CAC 40 index closed down 2.2% to 5,624.78,
Germany’s DAX index lost 2% to 7,453.59, and Britain’s FTSE 100
fell 2% to 6,271.20.
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Darren Wong
Associate Editor
darrenw@tradingmarkets.com
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