While you were sleeping: BusinessWire overnight wrap

Thursday 18th September 2008

Wall Street plunged, led by financials, wiping out initial gains on the bail-out of American International Group (AIG)on concern the rescue isn't enough to calm a global credit crisis.

Morgan Stanley dropped 25% to US$21.15 and Goldman Sachs fell 15% to US$113.70, helping send the S&P 500 financial index down 6%. The broader Standard & Poor's 500 Index fell 4.7% to 1156.39 and the Nasdaq Composite Index declined 4.9% to 2098.85.

Banks has grown increasingly reluctant to lend to each other since the US federal government took control of AIG, amid concern more finance companies may fail.

General Electric Co. fell 6.7% and US Steel Corp. declined 11%.

The slump in stocks helped bonds rally and sent bill rates lower as some investors sought the haven of guaranteed coupon payments.

Two-year Treasury yields fell to 1.64% from 1.79%. Three-month Treasury bill yields sunk to the lowest since WWII.

The US Treasury announced the sale of US$40 billion of cash management bills, new debt to help the Federal Reserve after the central bank offered up to $85 billion in loans to rescue AIG.

Providing some comfort to the federal government, Standard & Poor's and Moody's Investors Service affirmed the nation's AAA credit ratings and said the outlook is stable. Still, the US government's credit-rating profile is weaker after the AIG rescue, John Chambers, managing director of sovereign ratings at S&P, told Bloomberg News.

Precious metals

Demand for safer investments sent gold to its biggest gain in nine years and the price of silver jumped. Gold futures for December delivery gained 9% to $850.50 on the New York Mercantile Exchange.

The US dollar weakened versus the euro and yen.
The euro was 1.4% higher at $1.4321. The dollar fell 1.1% to 104.55 yen.

Crude oil also benefited from the flight from stocks and as US stockpiles fell. Crude for October delivery rose 6.6% to $97.16 a barrel on the New York Mercantile Exchange, the biggest one-day gain in more than three months.

In Europe, stocks including Germany's Hochtief AG sank amid concern financial turmoil will tip the region's economy into recession. Anglo American Plc fell 9.3%.

The Dow Jones Stoxx 600 Index declined 2.1% to 258.04, the lowest since mid 2005.

The cost of borrowing in dollars rose as banks hoarded cash. The London interbank offered rate, or Libor, rose 19 basis points to 3.06%, according to the British Bankers' Association.

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