The fallout from the US sub-prime crisis is expected to continue this week.
Central banks are expected to continue intervening in the money markets today following last week’s stock market turmoil.
It is thought that the European Central Bank is seeking to arrange a currency swap with the US Federal Reserve that would allow it to lend dollars to European banks that are having difficulty meeting short-term dollar funding needs.
There was concern that some of the world’s biggest banks may have significant liabilities from the US sub-prime crisis.Deutsche Bank and Commerzbank are among the latest to be caught up. Both banks are creditors to HomeBanc, the US mortgage company that filed for Chapter 11 bankruptcy protection in the US at the end of last week.
French bank BNP Paribas, which last week admitted it had frozen more than £1bn of funds after problems in the US sub-prime market, has also emerged as a creditor to HomeBanc.
A rally on Wall Street late on Friday left the Dow Jones Industrial Average only 31 points down by the close of. But analysts suggest that recent fluctuations are unlikely to be over.
The FTSE 100 suffered its worst session on Friday in more than four years, with £63bn wiped off the share values of companies on the index.
There are rumours that the Federal Reserve may be prepared to cut interest rates to protect the US economy from a hard landing.
The International Monetary Fund said in a statement that the crisis was manageable, and that ‘the fundamentals supporting global growth remain in place’.