U.S. Stocks Tumble On Credit Concerns

Investors' fears were brought to life Thursday morning as news surfaced that problems with the U.S. subprime mortgage crisis have spilled over into Europe. Markets on both sides are taking a hit as investors grapple with the ripple effects from a deeply troubled U.S. lending market.

In a statement released this morning French bank BNB Paribas announced they were forced to suspend three funds worth a total of $2.75 billion in USD. The bank said that the "complete evaporation of liquidity" in areas of the U.S. lending market was the culprit behind the freezing of the funds.

BNB Paribas, the largest publicly held bank in France, stated that the decision to temporarily suspend was due to "exceptional times," however they would re-open the funds as soon as liquidity returns to the market. In an attempt to steady the financial markets and to inject liquidity, the European Central Bank took the highly unusual step of making available more than $130 billion in overnight funds at a low rate of 4 percent.

Crude oil futures for September delivery fell 1% to $71.42 a barrel on concerns that reduced economic growth will hamper fuel demand. Gold futures for December delivery dropped 1.7% to $674.80 an ounce as investors sold precious metals for cash to cover losses related to the U.S. subprime mortgage collapse.

Around Asia, Shanghai's Composite index rose once again adding nearly 2% to 4,754.10, Hong Kong's Hang Seng index lost 0.4% to 22,439.36, and Tokyo's Nikkei index rose 0.8% to 17,170.60.

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Darren Wong
Associate Editor
darrenw@tradingmarkets.com

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