The fall, which followed a big drop in the Asian stock markets overnight, followed a day of bad news from Wall Street. Citigroup started the big sell-off, when it said it would need a $12.5bn cash injection after making a loss of nearly $10bn last quarter. Merrill Lynch also said it had been forced to go cap in hand to new investors, to the tune of $6.6bn, while JP Morgan revealed another $1.3bn deficit today.
To make matters worse, it then emerged that retail sales dropped by 0.4% in the US last month, making last year the worst for shopping since 2002. Meanwhile the dollar slid against the yen, the price of oil dropped, and doom-mongers everywhere convinced themselves that the world’s biggest economy will be mired in recession well before Hilary or Barack get anywhere near the Oval Office (or is it Mitt today?).
Sure enough, the world’s stock markets went into meltdown. Indices across Asia plunged, particularly in Japan and Hong Kong. And having suffered its biggest one-day fall since August yesterday, the FTSE was at it again this morning – it quickly dropped below the 6,000 mark (which the City likes to think is of enormous psychological significance), sinking as low as 5,940 at one point. Given the mixed results that have been emerging from the high street in the last week, there doesn’t seem to be much more cause for cheer over here either.
As ever, it’s likely that the markets will sink too far in the other direction – which means that there could be some bargains on offer for those with a steady nerve. By the looks of it, the big winners from the sub-prime mess will be the sovereign wealth funds and now the Japanese banks, who are all taking advantage of their big cash piles to hoover up stakes in Wall Street’s finest on the cheap.
It's just a pity that Goldman Sachs can’t persuade any of them to take the Rock off our hands...