European markets collapse

All the European markets collapse due to the American contagious disease.
Paris stock exchange finished his day with a 5.04% decreased (its his lowest level since may 2005), CAC 40 lost 209.90 points, Index Footsie-100 lost 269.70 and DAX lost 4.23%.

The US plan of rescue, Paulson Plan, has not saved the economy and the confidence betrothed by the US appears now like a fairy tale. It is the panic on the European markets, it is the panic everywhere. After the collapse of many american firms, european firms are now affected:
-DEXIA lost 28.50%
-NATIXIS lost 25%
-Partial nationalization of FORTIS
-Dismantling of the British bank Bradford and Bingley
-Hypo real estate, Germany's second-biggest commercial- property lender saved by a nationalization
-Citigroup absorbed the losses of Wachovia

The credit crisis reverberated around the world and the central banks are the rescuers of the economy. The European Central bank plans to inject €120 billion in the market to save the market and his European firms.

The shocks of the US earthquake affect everyday one part of the world: US economy, European economy...Who is the first on the list?

Expression of confidence

Over the past two weeks, financial markets suffer and are not really stable. Since the bankruptcy of Lehman Brothers and the repurchase of Merrill Lynch by Bank of America, the shares of Goldman Sachs fall.

Buy Tuesday 24th of September, the most talented stock-pickers and also one of the richest men of the world, Warren Buffet, has decided to invest $ 5 billion of perpetual preferred stock in Goldman Sachs. This investment carries 10 percent dividend.

This announcement intervenes two days after the decision of the Fed to convert two of the most important investment bank (Goldman Sachs and Morgan Stanley) to a bank holding company, which is the most common structure of many commercial banks.

Warren Buffet through Berkshire Hathaway Inc, which has total assets of nearly $278 billion, including significant stakes in well known companies like America Express, Wells Fargo & Co…, will receive warrants. These warrants allow to Buffet to buy $5 billion in common stock at $115 per share any time over the next five years.

Shares of Goldman Sachs rose 8.5% following the announcement. In regular trading, the shares rose by 3.5 percent. On the other hand, Goldman Sachs plans to sell $2.5 billion of common stock to improve his balance sheet.

Also, a Japanese bank Sumitomo Mitsui Financial plans to plough several hundred billion yen into Goldman Sachs.

This announcement is one of the biggest expressions of confidence in the financial system since the credit crisis.

These weeks are crazy!!!!

Since last Monday, financials markets collapse, dollar collapse, US housing market collapse fear and Lehman Brothers file for bankrupcy. 

First of all, last Monday one of the giant of investment bank, Lehman Brothers annouced his critical financial position. In 12 months, its shares loose 94%, from $67 to $3.65. This announcement creates chaos on the market. 

On Sunday, Fed and 10 others companies decided to support financial market. JP Morgan Chase, Goldman Sachs, Bank of America, Barclays, Citigroup, Crédit Suisse, Deutsche Bank, Merrill Lynch, Morgan Stanley and UBS injected $70 billion to set up a collateralized borrowing facility, in case of difficulties. 

By this hostile crisis, dollar collapse during Asiatic Markets opening hours. Monday, Euro coasted $1.4402 and at the end of the falls $1.4229. The preassures of the market and the doubts concerning Lehman Brothers have caused partly this collapse. 

This Monday, Lehman Brothers asks for the "Chapter 11" bankcruptcy to protect it of its creditors. His branch of Asset Management still working, but try to seels its brokerage activities. 

This crisis has affected an other bank: Merrill Lynch. Sunday, Bank of America and Merrill Lynch were in talks about a future fusion. And Monday, Bank of America buys Merrill Lynch for $50 billion to create a unique financial services firm: the first financial institution of the world. 

We can say that these two weeks have been spectacular, unpredictable and dramatic in the history of financial market. 

Carine Giubergia