Katie Allen
Friday August 10, 2007
Guardian Unlimited

Wall Street took another beating this afternoon as shares extended
yesterday's heavy losses while in London the FTSE 100 suffered its
biggest one-day loss for more than four years.

With a rapidly spreading credit crisis showing no sign of let up, the
London index of leading shares closed down 232.9 points at 6,038.3, a
fall of 3.7%.

This was the biggest one-day drop since March 2003 and wiped an
estimated £63bn off the Footsie's value.

The Dow Jones Industrial Average was down more than 200 points at one
stage this afternoon, but by 4.30pm UK time had pared back these losses
to be 122.02 points down at 13,148.7.

The panicky mood across the Atlantic was not helped by further sub-prime
fall-out in the financial sector.

Shares in Countrywide Financial, America's largest mortgage lender,
dropped sharply after its warning late on Thursday that the
"unprecedented disruptions" in the market could hurt its operations in
the short term.

Washington Mutual, the nation's number one savings and loan firm, also
saw its shares slide after warning that it will be "adversely affected"
by the mortgage market turmoil.

"The dominos of the global credit system keep falling. News after the US
close yesterday that two of the largest providers of home loans in the
States are potentially in trouble was the trigger for today's rout,"
said Martin Slaney, head of spread betting at GFT Global Markets.

"The markets perceive more bad news is around the corner. It is easy to
get caught up in emotive terms when we see market corrections such as
this but the implications of a full-scale credit squeeze for hedge
funds, private equity and leveraged buy-outs are certainly being priced in."

Fears intensified today following a report in the Wall Street Journal
that US regulators were delving into the books of some top investment
banks, including Goldman Sachs and Merrill Lynch, to make sure they are
not hiding sub-prime losses.

The current crisis has been sparked by fears about the spread of credit
problems which began with the US sub-prime mortgage market - risky loans
to borrowers with poor credit histories. Many of these loans are now
going bad.

Although the Bank of England has so far taken no action, many other
central banks around the world have reacted to the market turmoil and
their moves initially heightened the alarm.

The European Central Bank yesterday took its boldest steps since the
9/11 terror attacks to soothe markets with a massive injection of funds.
Today it announced it was continuing to provide resources to financial
markets. It injected an emergency €95bn (£64.5bn) into the markets and
the US Federal Reserve added $24bn (£12bn) in temporary reserves to the
US banking system to shore up liquidity and bring down short-term
interest rates.

Overnight, the Bank of Japan and the Australian central bank took
similar action.