World Financial Markets Plunge

Wall Street Braces for More Volatility as stocks fell sharply worldwide Monday following declines on Wall Street last week amid investor pessimism over the U.S. government's stimulus plan to prevent a recession.

^MERV

MerVal

Argentina

1,876.870 3:00PM EST

125.590 (6.27%)

^BVSP

Bovespa

Brazil

53,709.11 3:15PM EST

3,797.29 (6.60%)

^GSPTSE

S&P TSX Composite

Canada

12,190.59 3:02PM EST

546.53 (4.29%)

^MXX

IPC

Mexico

25,471.641 2:56PM EST

1,242.189 (4.65%)

^MIBTEL

MIBTel

Italy

25,606.0000 11:40AM EST

1,304.0000 (4.85%)

^GDAXI

DAX

Germany

6,790.19 11:45AM EST

523.98 (7.16%)

^AORD

All Ordinaries

Australia

5,630.900 12:11AM EST

168.500 (2.91%)

^HSI

Hang Seng

Hong Kong

23,818.86 4:59AM EST

1,383.01 (5.49%)

^SSEC

Shanghai Composite

China

4,914.435 2:00AM EST

266.079 (5.14%)

^N225

Nikkei 225

Japan

13,325.94 2:00AM EST

535.35 (3.86%)

U.S. stock futures point to major decline on re-open
By Steve Goldstein, MarketWatch
Last update: 11:19 a.m. EST Jan. 21, 2008

LONDON (MarketWatch) -- If futures contracts traded on a day when U.S. stocks weren't even due to open are anything near accurate, then markets will be in for a major decline on Tuesday, with concerns about bond insurers and the health of financial institutions dragging markets lower.

March contracts on the Dow Jones Industrial Average traded 482 points lower to 11,624.

Futures contract don't move in complete lockstep to the underlying indexes, but by comparison, the Dow industrials fell 382 points on Sept. 20, 2001, just days after the terrorist attack on the Twin Towers, and by 387 points on Aug. 9, 2007, shortly after the recent credit crunch first emerged.

S&P 500 futures fell 55 points to 1,270.10 and the Nasdaq 100 futures lost 72.25 points to 1,777.25. U.S. markets were closed Monday for the Martin Luther King holiday. Trading won't resume until Tuesday.

The futures declines are on the back of big drops in European and Asian stock markets. From developing markets like Shanghai -- down over 5% -- to established ones in Paris -- down nearly 6% -- financial institutions around the world sold off.

Strategists at Morgan Stanley told clients on Monday to stay in cash. "Our themes continue to be: patience, earnings recession, U.S. recession spreading global, bear market regime, don't be lured into value stocks as most are likely to be value traps, much more monetary easing. We expect flat but volatile markets just as in the 1989-92 period -- a real whipsaw environment for the market," they said.

Much of the fear stems from worries about potential ratings cuts for bond insurers, such as Ambac Financial (ABK) and MBIA (MBI) , AAA ratings are on thin ice. Fitch Ratings on Friday downgraded Ambac to AA from AAA after the bond insurer abandoned its plan to sell $1 billion in equity.

When a bond insurer is downgraded, all the securities it has guaranteed are, in theory, downgraded as well -- putting some $1.4 trillion of municipal bond securities at risk and more than $600 billion of structured finance securities at risk.

The fears were lent some support when the head of France's central bank, Christian Noyer, said that French banks "clearly, like all banks, in the world still (are) in the process of marking down assets."

In Asia, markets feared an $8 billion write off from the Bank of China, one of China's big four financial institutions. The rescue plan presented by President Bush last week in a bid to help the U.S. avoid recession also wasn't well-received by markets.

"Ambivalence over Bush's rescue plan for the U.S. economy was the trigger of this rout," said Martin Slaney, head of derivatives at GFT Global Markets. The Japanese yen surged against rivals -- up about 2% against the euro and 1% against the U.S. dollar -- with investors trimming risk by buying back the low-yielding currency.

WestLB of Germany added to concerns by saying it would lose about $1.5 billion this year and take a write-off of similar size. "Market sentiment is really sour," said Gerhard Schwarz, a strategist at UniCredit Markets. "There's been more bad news from the financial sector on top of continued recession fears," he said, speaking of Monday's equity market action.

Economic fears cuff Asia; India, Hong Kong slide

Recession fears spark heavy selling; Japan, China, South Korea also slump

By V. Phani Kumar, MarketWatch

Last update: 6:41 a.m. EST Jan. 21, 2008

HONG KONG (MarketWatch) -- Asian markets were battered Monday, with fears the U.S. may slip into recession triggering heavy selling that dragged down the indexes in Japan, China, Hong Kong, India, South Korea and Singapore by at least 3%.

Indian stocks were hit the hardest, dropping nearly 11% at one point in afternoon trading, before recovering.

Australian shares extended their losing streak into the 11th straight session, while New Zealand stocks took losses into the 13th consecutive day.

Financials such as Sompo Japan Insurance and HSBC Holdings as well as technology shares such as Infosys Technologies and Satyam Computer Services hit new 52-week lows during the session, while mining giant Rio Tinto reversed the prior session's sharp gains.

The Japanese yen scored heavily against major currencies, as risk-averse investors reversed their yen carry trades.

Hirokazu Yuihama, regional head of strategy at the Daiwa Institute of Research in Shanghai, attributed the decline in markets to fears of an impact on exports from Asia, in the event the U.S. enters a recession.

"The decoupling between the U.S. and Asian economies is still in progress. Though the U.S. growth rate has been declining, the growth of exports from Asia is steadily growing in double digits," said Yuihama.

"It is no longer a question of avoiding recession in the U.S. any more. It is a case of damage limitation, because the damage has already been done," said Andrew Clarke, a sales trader at SG Securities in Hong Kong. "The [U.S. authorities] now have to get on and act fast."

The selling was sparked by a slump on Wall Street Friday, when the Dow Jones Industrial Average declined for the fourth day in a row on fresh concerns that U.S. bond insurers could trigger another wave of big write-downs from banks and brokerage firms.


Stocks in Europe crushed on financial-sector worries
Fears for write-downs hammer Societe Generale, Credit Agricole, BNP Paribas
By Sarah Turner, MarketWatch
Last update: 10:21 a.m. EST Jan. 21, 2008

LONDON (MarketWatch) -- Stocks in Europe sold off massively on Monday, with banks and insurance firms pacing a hasty retreat, as fears of more asset write-downs intensified amid continuing gloom over economic prospects.

"Market sentiment is really sour," said Gerhard Schwarz, a strategist at UniCredit Markets. "There's been more bad news from the financial sector on top of continued recession fears," he said, speaking of Monday's equity market action.

The pan-European Dow Jones Stoxx 600 index plunged 4.3% to 313.52, pulled down by notable losses from banks and insurance firms such as Societe Generale and Allianz. The index earlier touched a low of 308.69, marking the biggest one day drop for at least six months.

Leading national indexes were putting in an even worse performance, with the French CAC-40 index down 5% to 4,837.40, the German DAX 30 index down 6% to 6,879.17 and the U.K. FTSE 100 index down 3.6% to 5,691.90.

The sell-off came after a downbeat day on Friday for U.S. stocks cemented the worst weekly performance on Wall Street for five years and as Asian markets fell sharply on Monday.

Losses from financials were to blame in both cases, after U.S. bond insurers came under fire from a ratings agency and as a proposed economic stimulus plan from President Bush failed to generate much enthusiasm.

"Ambivalence over Bush's rescue plan for the U.S. economy was the trigger of this rout," said Martin Slaney, head of derivatives at GFT Global Markets. And technical selling may have played a part in Monday's losses in Europe, according to Bart Robenek, senior strategist at Fortis.

"I think that there is technical selling. There were stops triggered," he said.