When it rains, it pours. And it sure is pouring now as stock markets around the globe are sliding to their worst levels since 9-11.
The stock market slide is not unexpected as the US sub-prime mortgages crisis bit into profits, but the speed of the drop sure is shocking. Japan's Nikkei for example has dropped around 17 percent since the start of the year; and it's still Jan 22! To be fair, fears of the U.S. subprime mortgage crisis has drag all financial markets lower, not just Japan. Indices in Australia, China, Singapore, South Korea, Taiwan, Indonesia, Philippines are all down since the start of the year.
And the fears are well-founded.
The latest bank to be affected is German bank WestLB. WestLB has said that it expects to make a net loss of 1bn euros due to the crisis and a similar amount in write-downs. That's 2bn euros in total! The bank is now planning to cut 2,000 jobs and merge with a rival state lender to stay afloat. Another bank hurt by the crisis is the Bank of China who is also reported to be about to make big write-downs from its exposure to US sub-prime mortgages. Add them to Merrill Lynch $7.8bn loss, JP Morgan's $1.3bn loss and Citigroup's $9.8bn loss; that's over $20bn loss due to the crisis. And those are the ones we know about!
It's pouring now at the stock markets; put your raincoat on, because it'll be awhile before we'll see sunshine again.