Lehman uncertainty weighs on world shares
Reuters – September 10, 2008
World stocks headed for last week's two-year low on Wednesday as worries over the fate of U.S. investment bank Lehman Brothers grew after Korean Development Bank said talks on investment had ended in disagreement.
The low-yielding yen trimmed losses while safe-haven government bonds also pared losses after KDB said it has ended talks for now with Lehman because of disagreement over terms and its assessment of financial market conditions.
Lehman, a casualty of the one-year-old credit crunch, is bringing forward the release of quarterly results and key strategic initiatives to 1130 GMT after its shares sank to a decade low on Tuesday on growing concern over its ability to raise capital.
The bank is in talks with BlackRock Inc to sell a package of British real estate assets, people familiar with the matter told the Wall Street Journal.
"We are reacting to the Lehman news... At the moment it looks like there's no deal in the offing so people are selling risk," a London-based currency trader said.
The FTSEurofirst 300 index fell 0.3 percent while the MSCI main world equity index .MIWD00000PUS fell 0.2 percent, approaching the two-year low set last week.
Lehman shares traded in Frankfurt rose 16 percent as hopes for asset sales and eventual capital raising remained ahead of the results.
The dollar .DXY fell 0.15 percent against a basket of major currencies, after hitting a one-year high earlier this week. The yen trimmed its losses after the Lehman-KDB news to stand down 0.3 percent at 107.30 per dollar .
Investor optimism, triggered after Washington seized control of U.S. mortgage firms Fannie Mae and Freddie Mac, quickly gave way to concerns about the broader financial system and the health of the global economy.
"The bailout honeymoon already appears to be over. Risk aversion was back with a vengeance," Rabobank said in a note to clients.
Emerging sovereign spreads 11EMJ were steady while emerging stocks .MSCIEF fell 1.2 percent to levels not seen since March.
The December Bund future FGBLc1 fell 13 ticks.
U.S. light crude CLc1 rose 0.7 percent to $104.16 a barrel, rebounding from Tuesday's five-month low below $100 after OPEC agreed to an unexpected production cut.
Gold ticked higher to $777.10 an ounce.
(Additional reporting by Naomi Tajitsu and Veronica Brown; editing by Patrick Graham)
Last updated 11/09/2008