Lehman shockwaves send FTSE plummeting
- 00:02:15
- ITN
Lehman shockwaves send FTSE plummeting
The FTSE 100 Index plunged to its lowest level for more than three years as Lehman Brothers shockwaves continued to reverberate. Earlier, the Bank of England was forced to pump an extra £20 billion into money markets which have panicked since the Wall Street giant announced it was filing for bankruptcy. Banks put in bids worth £58.1 billion for the two-day cash reserves after scrambling for £24.1 billion on Monday when the BoE injected £5 billion - the Bank's first such move since March, when markets were rocked by the Bear Stearns debacle. The European Central Bank has also made further funds available to financial organisations after Lehman's, a 158-year-old US investment bank, lost billions in the credit crunch. Prior to trading resuming on Wall Street, the FTSE plummeted at one point to 4,961.20. It finished the day 178.6 points lower at 5025.6 - a fall of 3.4 per cent and its lowest close since June 2005. Across the pond, the Dow Jones Industrial Average witnessed its worst fall since the 9/11 terror attacks on Monday when it plunged 504.5 points as investors reacted badly to the meltdown of Lehman. The Dow Jones later rallied to close 141.51 points up at 11059.0 despite the US Federal Reserve's decision to hold interest rates steady. In the UK, sentiment was hit by Bank of England Governor Mervyn King's letter to Chancellor Alistair Darling, issued after inflation hit 4.7 per cent in August. Halifax Bank of Scotland has been the biggest casualty of the collapse with shares down almost 40 per cent at one point on top of a near 18 per cent fall on Monday - wiping more than £5 billion off the group's market capitalisation. US stockbroker Merrill Lynch - another victim of heavy losses linked to the US housing market - has been bought by Bank of America in a deal worth £28 billion, which also spooked markets. And there are also fears giant US insurer AIG - the main shirt sponsor of Manchester United Football Club - could go bust. Its shares fell another 63 per cent on Wall Street after nearly halving last week. Last night it was granted a £11.2 billion lifeline to shore up its finances. Lehman Brothers now joins nationalised UK bank Northern Rock and US rival Bear Stearns - which hit trouble in March - on the casualty list following a year of turmoil. The future of 5,000 Lehman Brothers staff in the UK - around 4,000 at its Canary Wharf offices and 1,000 at a subsidiary in Buckinghamshire - looks bleak as PricewaterhouseCoopers were called in as administrators of four British subsidiaries. Although some employees will be working for Lehman for "many months to come" as its complex business is unravelled, others will leave the business sooner, PwC administrator Tony Lomas said. However, he said Lehman had "hundreds of billions" in liabilities and could not guarantee the cash to make payments to staff at the end of the week.
ITN | September 16, 2008
