Markets drop as world worries about US financial meltdown

September 24th, 2008 - 10:27 am ICT by IANS  

SensexNew York, Sep 24 (DPA) World leaders gathered at the UN General Assembly in New York were worried about the US financial turmoil as stock markets around the world shed value and Wall Street titans pleaded with Congress to give rapid approval to a bailout plan.In Paris, the head of the International Monetary Fund, Dominique Strauss-Kahn, called for other industrial nations to draw up plans to shore up their own financial sectors because of the globalised nature of the crisis.

The Organisation for Economic Cooperation and Development (OECD) praised the United States’ plan to rescue its badly ailing financial industry.

Investors appeared to be losing confidence in the US bailout plan, with stock markets in Asia and Europe falling back in the wake of Monday’s Wall Street selloff.

The benchmark CAC 40 in France was down 1.98 percent, London’s FTSE 100 fell 1.91 percent, and the DAX in Frankfurt slipped 0.64 percent.

Earlier, stock markets in Australia and Hong Kong registered drops of more than two percent. India’s Sensex was down three percent.

Pakistan’s Karachi Stock Exchange banned short-selling in all stocks following Moody’s down-grading of the country’s credit rating.

The ban on short-selling - in which traders sell borrowed stocks if they believe values will fall - follows similar moves this week by Wall Street and other top international markets to avoid dangerous speculation in tumultuous economic times.

Pakistani banks agreed to set up a 30 billion rupee ($350 million) fund to support the country’s biggest market.

In New York, UN Secretary General Ban Ki-moon warned of the “perils of the current passage. We face a global financial crisis, a global energy crisis, a global food crisis”.

Ban called for a re-evaluation of the power of markets amid a financial crisis that has threatened economic growth and could derail the push for enhanced aid to developing countries.

“We need a new understanding on business ethics and governance, with more compassion and less uncritical faith in the magic of markets,” he said.

Deep scepticism greeted US Treasury Secretary Henry Paulson and Federal Reserve chief Ben Bernanke at their first public testimony before a Senate panel on their proposed $700 billion rescue plan for the US financial system.

The crisis has prompted calls for the most expensive US government intervention in capital markets in history as credit has frozen, deny businesses access to capital for investment and even the day-to-day smoothing of operating cash flow to pay employees and buy materials.

US President George W. Bush sought to allay worries about the US economy during his UN speech, with references to the bold steps of the plan.

“Our economies are more closely connected than ever before,” Bush said, adding he was aware that the world was watching how the US addresses the problems.

Other foreign leaders joined Ban’s call for a new global financial order.

French President Nicolas Sarkozy said that the world must “rebuild capitalism”, while Brazilian President Luiz Inacio Lula da Silva slammed the “boundless greed” of market speculators for putting global growth at risk.

European leaders have so far been unmoved to develop the sort of drastic bailout being formulated in Washington. The US plan could even include foreign firms that have major US-based operations.

Because of their large public debts, European governments have less flexibility - and money - to deal with the crisis. In addition, European leaders and bankers seem to be convinced that the fallout from the US financial turmoil will be limited.

Although finance ministers and central bankers from the Group of Seven (G-7) leading industrialised nations pledged this week to take action to help stabilise the global economy, little agreement has been found among the individual countries as to what action to take.

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