Lehman Brothers Collapse. Asian Stock Market Reaction Sep 16

Sep. 16, 2008. LONDON (Reuters) - Investors dumped equities and oil as the financial meltdown spread on Tuesday, a day after Lehman Brothers collapsed, driving the yen and government bonds higher and unleashing a panic rush to secure short-term cash. A day after Lehman filed for bankruptcy protection and Bank of America (BAC.N: Quote, Profile, Research, Stock Buzz) agreed to buy Merrill Lynch (MER.N: Quote, Profile, Research, Stock Buzz), concerns about the global financial system deepened as fears grew American International Group (AIG.N: Quote, Profile, Research, Stock Buzz) could be the next financial giant to tumble. Third-quarter earnings results from Goldman Sachs (GS.N: Quote, Profile, Research, Stock Buzz) and an interest rate decision from the Federal Reserve top the day's agenda with a panic scramble in the interbank money market threatening to trigger a fresh liquidity crunch. The cost of borrowing dollars overnight rose to 10 percent five times the benchmark Fed rate of 2 percent. Interest rate futures were pricing in a more than 90 percent chance the Fed would cut rates to 1.75 percent later. Asian and European central banks flooded money markets with cash as they sought to prevent the upheaval on Wall Street from clogging the pipes of the global financial system. "There's a smell of cordite in the air. It's like the day after the explosion. People are still extremely nervous. They're wondering what happens next," said Justin Urquhart Stewart, investment director at Seven Investment Management. "Investors are looking at what other companies have weak balance sheets. Now we need a bit of leadership from the central banks and the regulators." The MSCI main world equity index fell 1.2 percent, its lowest since June 2006, on top of a 3.6 percent tumble on Monday. Source: http://www.reuters.com/article/hotStocksNews/idUSN1244441420080916

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