GERMANY/ VARIOUS: Europe's economy faces market stress test
- 00:00:04
- ITN Source
GERMANY/ VARIOUS: Europe's economy faces market stress test
The European Central Bank injects 61 billion euros into the euro-zone money markets, the day after pumping a record amount of cash into the European markets. Euro-zone money markets steadied on Friday (August 10) after the European Central Bank pumped cash into the financial system for the second day in a row to reassure traders spooked by credit problems. The ECB injected 61.1 billion euros ($83.7 billion) in three-day money into the market, below the record 94.8 billion euros injected on Thursday but enough to calm frayed nerves. The Central Bank's pumped the cash into the money markets on Thursday, after France's biggest listed bank, BNP Paribas, froze funds hit by U.S. mortgage woes. Director of portfolio management company Montsegur Finance in Paris, Francois Chaulet said that banks and insurers are now keeping a cautious eye out for who might be the next to announce losses after this week's market action, "What has happened this week is this: even if they have not been damaged either by the results or in their own funds, there are certainly indications that some of their clients have been damaged," Chaulet said. Stocks prices around the world have been tumbling, as investors fear the growing fallout from mortgage-lending problems in the U-S. The U.S. Federal Reserve, Bank of Japan and other central banks followed the ECB's Thursday lead by signalling that they would provide enough temporary liquidity to keep markets running smoothly. Nonetheless, fears of a liquidity crisis hit stocks and high-yielding currencies hard on Friday as investors dumped riskier assets. Henk Potts, Equity Strategist at Barclays Wealth in London said the steps taken by global central banks suggest the world economy is on the verge of a credit crunch and the cash injections were part of a "preemptive strike" to avoid this. In Frankfurt Fidel Helmer at Hauck & Aufhauser private bank forecast a return to normal market trade next week provided nothing happen over the weekend, "The central banks are talking to each other in order to master this crisis, which does exist without a doubt, as quickly and as efficiently as possible," he said. Overnight rates had peaked above 4.6 percent on Thursday, after markets were unnerved by the decision by France's biggest bank, BNP Paribas, to close three funds hit by the subprime market crisis.
ITN Source | August 9, 2007
