World's stock markets sink; Dow falls below 10,000

October 07 12:05:01 PM, LA Times

Foreign governments' attempts to shore up financial institutions trigger a sell-off. Credit markets remain tight; a potentially severe worldwide recession is feared. But oil prices drop. Stock markets around the world collapsed today as the credit crisis imperiling banks in the United States appeared to be swiftly contaminating major financial institutions around the world.

The Dow Jones Industrial Average plummeted as much as 800 points before rebounding to close down about 370 points, which put it below 10,000. Some foreign stock markets were in a free fall, and the all-important credit markets remained under extreme stress. Crude oil sank more $6 a barrel to below $90 on concern that recession will grip the global economy.

  Full coverage: Financial system in... The immediate cause of today's sell-off was a series of moves over the weekend by foreign governments to shore up financial institutions whose foundations have been jeopardized by the global credit crunch.

Germany initiated a bailout of giant property lender Hypo Real Estate Holding while Belgium and Luxembourg arranged for French bank BNP Paribas to take over some of the operations of stricken Fortis.

The hastily thrown together actions echoed the furious efforts mounted by U.S. officials in recent weeks to rescue American financial giants such as Fannie Mae, Freddie Mac and American International Group Inc.

Stock/fund symbol or name:

The cascade of selling was supported by a realization that the U.S. government's $700-billion rescue package approved last week hasn't improved confidence in the credit markets and a growing consensus that the bailout won't be able to stave off a potentially severe recession from taking hold around the world.

The Dow closed down 369.88 points, or 3.6%, at 9,955.50. The Standard & Poor's 500 index tumbled 3.9% and the Nasdaq composite index sank 4.3%.

Key stock indexes plunged 7.9% in Britain, 7.1% in Germany and 9% in France.

Yields on short-term Treasury securities remained quite low as many investors latched onto them to avoid risk. The yield on the six-month Treasury bill fell to 1.01% from 1.10% late Friday. The three-month T-bill ended late trading at 0.47%, unchanged.

Shares of Citigroup Inc. fell 5.1% as it and Wells Fargo & Co. battled for control of Wachovia Corp.

Wells Fargo slid 2.7%, while Wachovia retreated 6.9% after jumping 59% on Friday.

walter.hamilton@latimes.com



More... Money & Co. blog Market Beat columnist Tom Petruno blogs about financial market and economic trends and how it all affects your money.

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