Turmoil on the Markets Affects Us All
The repercussions following the fall of Lehman Brothers and Merrill Lynch banks in the US at the weekend are going to affect us all, experts warned. Pensions, savings and mortgages will all be affected. Stock markets around the world lost around 4% on Meltdown Monday.
Experts are warning that the stock market falls of Meltdown Monday – as it is being called – will have repercussions for us all. Whether you are a saver, a pension investor or a homeowner, you will be affected.
As stock markets around the plummeted after the weekend accounted for Lehman Brothers and Merrill Lynch in the US, there were gloomy forecasts that more institutions will follow these giants. The FTSE 100 lost almost 4%, and overnight the Dow Jones index was 4.4% down on Monday.
Both Lehman and Merrill were over-exposed to the sub-prime mortgage market in the US, which has been the root cause of the worldwide credit crunch.
Although American banking might seem half a world away for UK residents, the facts are that banking jobs in the UK will be affected, and support services will be hit by the knock-on effect. More directly, pension funds will be hit because they invest in the stock market; banking shares such as HBOS were plunging on Monday; the Bank of England pumped more money into the system; other banks in the UK may become victims, and savings beyond the guaranteed first £35,000 could be hit.
In the US, President Bush and US Treasury Secretary Henry Paulson sought to reassure the markets, but their words had little effect. Bush said he was confident that the capital markets were resilient enough to deal with these adjustments, and Paulson said it was a difficult period in the financial markets right now as some of the past excesses were being worked off.
In the UK British banking shares lost more than £16bn in value - this after their shares have already been mauled by the credit crunch. HBOS felt the need to issue a statement saying that it is ’a strong bank’. Bradford & Bingley has also been fighting adverse rumours about its financial health.
Stock markets around the world fell, and the week promises to continue the turmoil.
