...with the dollar making appropriate gains.
Banking crash hits Europe as ECB loses traction
The global credit crisis has slammed into Europe with stunning
violence over the last two days, triggering five major bank rescues
and a near total shut-down of the region's credit markets.
By Ambrose Evans-Pritchard
Last Updated: 8:17PM BST 29 Sep 2008
"The European financial sector is on trial: we have to support our
banks." said French President Nicolas Sarkozy. He has reportedly
ordered the state investment arm Caisse Des Depots to shore up Dexia,
even though the bank is based in Belgium.
Germany's Hypo Real Estate, a commercial property lender, was rescued
with a €35bn lifeline from a consortium of local banks. The lender has
$560bn in liabilities, almost as much as Lehman Brothers.
Hypo Real's share price crashed 74pc, setting off a masse exodus from
financial stocks in Frankfurt. Commerzbank fell 23pc and Aareal Bank
was off 43pc.
Anglo Irish Bank was down 44pc in Dublin on wholesale funding fears.
Europe's credit markets have come close to seizing up as three-month
Euribor jumped to a record 5.22pc and OIS spreads rocketed to 113
basis points.
"The interbank market has collapsed," said Hans Redeker, currency
chief at BNP Paribas.
"We're now seeing a domino effect as the credit multiplier goes into
reverse and forces banks to cut back lending to clients," he said.
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