Morgan Stanley became the next great Wall Street name in peril on Thursday with reports it was in talks to be bought by US Wachovia Corporation or a Chinese bank, as HBOS bank was bailed out in London.
With the flames of financial crisis outrunning renewed central bank intervention and the nationalization of US insurance titan American International Group (AIG), US media reports meanwhile said Morgan Stanley was looking for help.
The New York Times reported that Morgan Stanley, one of the last two independent US-based investment banks, was in talks to merge with Wachovia Corporation. Separately, CNBC business network said that the bank was in talks to be bought by the Chinese bank CITIC (中國國際信託投資).
Fears mounted that the US Federal Reserve’s US$85 billion loan to rescue AIG might not be sufficient to reverse a rout on financial markets.
The White House said on Wednesday that recent US economic news painted a “very mixed picture” but added that the US had “the strength” to overcome the financial crisis.
The latest US drama was unfolding against a background of plummeting global stocks and yields, or interest rates, on US Treasury bonds as investors rushed for the safety of government debt instruments.
Aaron Smith at Economy.com called the action “an unprecedented flight to quality,” adding: “Investor concern is also growing about the Fed’s ability to support markets in the future as the central bank’s own balance sheet is reduced.”
Asian stocks plunged further yesterday, tracking declines on Wall Street as investors feared more companies could succumb to the financial crisis.
Hong Kong’s Hang Seng Index, which sank more than 7 percent at one point, was down 2.5 percent at 17,185.64 in late afternoon trading. Tokyo’s Nikkei 225 index slid 2.2 percent to 11,489.30, a three-year low.
“It’s a complete collapse of confidence,” said Francis Lun (藺常念), general manager of Fulbright Securities Ltd (富昌證券) in Hong Kong. “The financial crisis in the US is hitting everyone; everyone is running for cover. If the largest insurance company can fail, than no one is safe.”
Russia’s main stock exchanges were mostly closed yesterday, a day after regulators suspended trading amid a plummet in share prices. The MICEX resumed limited trading; it wasn’t immediately clear when the RTS would reopen.
In other markets, Australia’s S&P/ASX200 index fell 2.4 percent, South Korea’s Kospi lost 2.3 percent, India’s Sensex lost around 4 percent and China’s Shanghai benchmark dropped 2.2 percent.
The losses tracked US markets, where the Dow Jones industrial average fell about 450 points on Wednesday, or 4.06 percent, to 10,609.66.
As equities markets staggered, investors fled to gold, seen as a safe haven in times of trouble. Gold for December delivery rose as much as US$90.40, or 11.6 percent, to US$870.90 an ounce in after-hours trading on the New York Mercantile Exchange after jumping US$70 to settle at US$850.50 in the regular session.
Oil rose above US$97 in Asian trade yesterday, extending its big gains overnight. The dollar was slightly higher at ¥105.13 and the euro rose to US$1.4328.
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