Markets in meltdown as global fears grow

 
Julian Harris
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STOCKS nose-dived in the opening minutes of trading in Japan this morning, mirroring another disastrous day for markets in Europe and the US yesterday.

The Nikkei lost over two per cent in initial trades, dropping to 8,756. Earlier in the month the index hit a low of 8,656.

The FTSE suffered its biggest fall in over two years yesterday, losing 4.5 per cent to end the day perilously close to the 5,000 mark, at 5,092.23.

After economists at Morgan Stanley said the US and Eurozone are “dangerously close to recession”, stocks in the US also collapsed. The Dow Jones industrial average fell 3.68 per cent, while the Nasdaq slumped even further, closing down 5.22 per cent.

As investors fled equities, the New York Stock Exchange and NYSE Amex Cash Markets invoked the rarely-used Rule 48 rule to smooth trading at the open.

Banks were among the worst-hit stocks on both sides of the pond, with double-digit percentage losses at Barclays, which fell 11.5 per cent and RBS, which tumbled 11.3 per cent. On Wall Street, Citigroup lost 6.3 per cent and Morgan Stanley shed 4.8 per cent.

Meanwhile, it emerged that some European banks are being forced to pay more for access to short-term US dollar loans as fresh fears surface over the Eurozone fiscal crisis spreading through the financial sector.

The Federal Reserve is taking a closer look at the US units of Europe’s biggest banks on worries that the region’s debt crisis could spread to the US banking system, the Wall Street Journal reported.