Markets battered despite AIG rescue

Asian bourses continue steep slide as global financial crisis deepens despite US rescue of insurance giant.

    Asia bourses have continued global markets' downward spiral [EPA]

    Juliette Saly, a senior analyst in one of Sydney's leading online brokerages, said fear, not market fundamentals, was driving most of the selling.

    "Investors are still unnerved by the fear and panic. The bail-out of AIG was not the quick-fix solution that investors were hoping for," she told Al Jazeera.

    "The thought that one of the world's largest companies could collapse just sent ripples throughout investors."

    With the markets losing value, investors have headed for safer ground, with gold futures making their biggest gains in two decades.

    The bleeding on Wall Street came despite attempts by the US government to ease market concerns by bailing out one of the world's largest insurance companies, agreeing to lend AIG $85bn in exchange for a nearly 80 per cent stake in the company.

    The Dow Jones Industrial average slid 451.88 points (4.09 per cent) to 10,607.14 at the close of trading on Wednesday, its second massive loss in three days.

    Russian trading suspended

    The fall followed further losses in European markets and Russia's suspension of stock and bond trading for the second consecutive day on Wednesday.

    Share markets around the world are reeling from the US financial crisis [AFP]
    On Tuesday the RTS exchange suffered its biggest single-day drop, down by 17 per cent, while the MICEX slid by 17.45 per cent despite a one-hour suspension of both markets.

    Following the worst drop in 10 years Russia's finance ministry quickly promised $60bn for local banks in an effort to shore up confidence.

    AIG's bail-out brings to about $900bn the total of US rescue efforts to stabilise the financial system and housing market.

    Edward Liddy, AIG's newly appointed head, was said to be about to hold a huge sale of the company's assets in order to pay off a $85bn loan from the US Federal Reserve which helped save its business.

    AIG, which has businesses ranging from life insurance to aeroplane leasing in 130 countries, is currently paying more than 11.4 per cent interest on the loan.

    AIG had faced a cash crunch after $18bn of losses over three financial quarters, largely because of complex securities that are tied to mortgages and which plunged in value as the US subprime mortgage crisis deepened.

    Investors and credit rating agencies had grown more doubtful that AIG could offset its losses with enough capital, which became more costly to raise as the firm's share price plunged.

    The US central bank stepped in on Tuesday amid worries that a collapse of AIG could cause far-reaching damage to the global financial system.

    SOURCE: Al Jazeera and agencies


    The shocking story of Israel's disappeared babies

    The shocking story of Israel's disappeared babies

    New information has come to light about thousands of mostly Yemeni children believed to have been abducted in the 1950s.

    Stories from the sex trade

    Stories from the sex trade

    Dutch sex workers, pimps and johns share their stories.

    Inside the world of India's booming fertility industry

    Inside the world of India's booming fertility industry

    As the stigma associated with being childless persists, some elderly women in India risk it all to become mothers.