Confidence Crisis Grips world markets (17-03-2008)

The news that is gripping global markets today is the surprise announcement that JPMorgan Chase is buying Bear Stearns and what’s more it is doing so at a fraction of what its value was this time last week. The move has received the approval of the Fed, which has also lowered its discount rate by 25 basis points and has extended to 30-day discount period to 90 days. 

Swift as the move was the combined efforts of JPMorgan and the Fed may have saved one of the venerated U.S. institutions from bankruptcy, but have failed to instill confidence in investors and markets in Asia plunged as the dollar sank to 13 year lows against the yen and a fresh record against the euro. Oil prices soared past $111 per barrel as did gold futures, which passed $1034 per troy ounce. The Nikkei closed down by 3.7%, while the Hang Seng lost 5.15% 

Europe is following suit since early morning trading, with losses across the board, led by banks as UBS, Royal Bank of Scotland and Barclays were losing more than 8 percent, while HBOS and Alliance & Leicester sank more than 11 percent. 

All this is sending U.S. market futures down, set for a miserable start to the week as the market tries to assimilate the magnitude of the event and one day before the Fed is due to announce its decision on interest rates.

Source: ISFM