As Wall Street prepares to open this morning, who knows what awaits us?!
Since Friday’s close, Lehman have gone under and Merrill Lynch have beens aved froma potentially similar fate as a result of a take-over by Bank of America.
Global financial markets were shaken to their core on this morning after the news that Lehman Brothers had filed for chapter 11 bankruptcy protection and Merrill Lynch agreed to be taken over as the deepening crisis took new higher profile victims.
It seems a long time now since the euphoria in the last week or so following the nationalization of Fannie Mae and Freddie Mac. Just as that news prompted a sharp rise on a Monday morning opening, is the latest news about to prompt a huge crash?
What financial stock is safe? Will there be a masssive frantic sell-off when Wall Street opens in just a couple of hours?
The U.S. Federal Reserve also said for the first time it will accept stocks in exchange for cash loans and 10 of the world’s top banks agreed to establish a $70 billion emergency fund, with any one of them able to tap up to a third of that. This is a panic reaction to preempt the opening of Wall Street this morning.
On a very black Sunday for Wall Street, frantic attempts to find a rescuer for Lehman failed.
Bank of America’s deal to buy Merrill Lynch in an all-stock deal worth $50 billion was announced as the world’s largest retail brokerage sought refuge from fears it could be the next victim of the junk market that teh NYSE has turned into.
“It’s a return to pure capitalism, the survival of the fittest — the government can’t and won’t bail everybody out,” said Justin Urquhart Stewart, investment director at 7 Investment Management in London. However teh bailout of Fannie and Freddie seems quite hypocritical at this stage. It only delayed the pain by a week.
“Investors will now retreat to the trustworthy banks, though that’s not a phrase that trips off the tongue easily nowadays.”
Asian and European stock markets tumbled as the worries about the knock-on risks of Lehman connected parties and further financial market turmoil sent investors scurrying for safe havens such as gold.
The FTSEurofirst 300 index of leading European shares fell over 3 percent in minutes, led by falling bank stocks such as UBS, down over 7 percent