European markets plunge amid massive selloffs
London exchange recovers slightly after falling early to its lowest level in five years. One analyst blames 'blind, panicked selling.'
LONDON -- The massive stock selloff that started in Asia on Friday hit Europe with a vengeance as all the region's major stock markets recorded sharp losses almost from the first minute of trading.
Following grim news from Tokyo and other Asian financial centers, the London exchange plunged by about 10% within half an hour after the opening bell to its lowest level in five years. By mid-afternoon the index had clawed back slightly, but was still hovering below the psychologically important number of 4,000.
The bourses in Paris and Frankfurt also nosedived, posting losses toward the close of the trading day of about 9%. The outlook was similar in Switzerland and Italy, and trading had to be suspended in at various points in some countries, including Iceland to Romania.
An analyst here described the steep drop in share value as the result of "blind, panicked selling." The flight from the London market was a particular blow for the British government, which had unveiled an $87-billion bailout package Wednesday that it touted as a groundbreaking plan to put the country's flailing banking system back on track.
Prime Minister Gordon Brown spent part of Friday calling on other countries to emulate the plan, which will partially nationalize some of the biggest players in British banking, including institutions such as Barclays and Lloyds TSB.
Under the plan, the government will offer cash infusions in exchange for special shares in the banks. Other European nations, such as Italy, are contemplating similar packages, as is the U.S.
Many eyes in Europe were trained on Washington, where finance ministers from around the world are gathering to try to come up with a common game plan to combat the global financial meltdown.
The frenzied selloff in Europe produced scenes of shell-shocked traders clutching their heads in disbelief as stock markets that had seemed so buoyant only a few months ago have lost hundreds of billions of dollars in value within a week.
Despite the British bailout package and moves by the European Central Bank to increase liquidity, banks in the region were still leery of lending to each other. The lending rates between them remained high.
Talk in Europe has turned to what seems like a certain global recession, but there is little agreement about how long such an economic downturn might last.
henry.chu@latimes.com
