Global investors hit the panic button again, amid fears that financial institutions are facing additional problems related to the troubled US mortgage market. Financial Times, The Times, Daily Telegraph, Independent. Guardian
Equity markets slumped and bond prices rose in the US and Europe. US financial stocks endured their worst day in five years, with some of the worst falls suffered by large banks and smaller specialist credit insurers.
The S&P 500 index fell 2.6% to 1,508.44, its worst day since August 9, dragged down by the 4.6% drop in financial stocks. The London FTSE 100 index fell 135.5 points – 2% – to 6,586.1, with similar falls in the German and French indices.
The signs of rising tension came as the US Federal Reserve added $41bn in temporary reserves to the banking system, the biggest one-day infusion since September 2001.
The biggest single reason for the decline in equities was the revival of worries that big banks in the US and Europe would unveil further credit write-offs.