The financial bailout in the United States has infected the markets in Europe and Asia, sending shares and exchange traded funds (ETFs) plummeting, and reinforcing fears of depressed global economic growth.
The passage of the bailout package in Washington did little to clear any uncertainty regarding the details of the deal and the extent to which it will actually help, reports Emily Flynn Vencat for Associated Press. This weekend, many European banks were moving fast to save any troubled banks, and made promises of protecting depositors from the credit crunch.
Analysts say that, unfortunately, Europe’s plan resembles that of the United States’ in its lack of detail, so investors aren’t feeling very confident.
In Asia, all markets were in the red, as major exchanges from the region dropped. Tokyo’s Nikkei 225 index fell to its lowest level in four and a half years, sinking 4.35%. Hong Kong’s Hang Seng index slid 5%.
As of Monday, the Federal government took extra steps to help stop the bleeding for this new aspect of the financial crisis, reports Aaron Task for Yahoo Finance.
- Doubling the size of the Term Auction Facility (TAF) auction to $150 billion each, meaning the Federal Reserve will offer to take up to $900 million in distressed assets from banks in exchange for Treasuries.
- The Feds will pay interest on commercial banks’ reserves, as authorized by the bailout.
These are regional ETFs representing Europe and Asia:
- iShares S&P Europe 350 Index Fund (IEV): down 31.3% year-to-date; 14.5% in the last month
- PowerShares FTSE/RAFI Europe Portfolio (PEF): down 33.6% year-to-date; 15.2% in the last month
- iShares S&P Asia 50 Index Fund (AIA): down 33.6% year-to-date; 12.7% in the last month
- BLDRs Asia 50 ADR Index Fund (ADRA): down 29.1% year-to-date; 12.9% in the last month
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.