BANKS INTERVENE IN ASIAN MARKETS

Central banks in Asia have again intervened in the financial markets in an effort to restore stability after more than a week of turmoil.
The Bank of Japan pumped funds into the banking system for a second day to ease fears of a credit crunch. Australia's central bank also intervened.

Share prices on Asian markets suffered further falls during trading on Friday, but not on the scale of a day earlier.

Thursday saw chaos on world markets, with sharp falls in London.

London's main FTSE 100 index slumped 4.1%, or 250 points, to end at 5,859, its steepest falls in four years. These sharp losses were echoed across Europe and Asia.

But hours before the closing bell in New York, shares on Wall Street staged a dramatic recovery after suffering heavy losses earlier in the day.

New York's Dow Jones index closed down 0.12%, or 15.7 points, at 12,845.8.

On Friday, Japan's Nikkei index fell 2.33% to hit it lowest point in nearly nine months. Earlier, the Bank of Japan said it would pump 1.2 trillion yen (US10.5bn, £5.25bn) into money markets.

Stock markets around the world have been falling sharply since 9 August amid fears of a credit crunch triggered by the US sub-prime mortgage market crisis.

Unrelenting slump

Fears that the turmoil in the US sub-prime lending market will hit banks and snowball into serious economic problems deepened after the biggest US lender, Countrywide Financial said it was tapping an entire $11.5bn (£5.8bn) credit facility to help it conduct its day-to-day business.


Traders are trying to work out if the current problems will continue

Earlier in the week, Countrywide said that mortgage delinquencies had risen in July to five-year highs.

The deteriorating conditions at the company, which provides home loans to one in five US homeowners, was a huge blow to investor confidence in risky assets, such as shares, which as been gradually chipped away by the unrelenting slump in the US housing sector.

As US interest rates have risen and the housing bubble has burst, a growing number of borrowers who are either on low incomes or have patchy credit ratings have defaulted on their loans.

The crisis in this section of the mortgage market, known as sub-prime, has led to extensive financial difficulties for a number of investment funds with heavy exposure to the once lucrative sector and triggered fears of a wider financial crisis.

A government report that showed construction of new homes in the US in July sliding to 10-year lows and news that investment banking giant Bear Stearns will chop 240 jobs at its sub-prime division, worsened the mood.

Even further intervention by the Federal Reserve, which pumped an extra $17bn (£8.6bn) into the US banking system on Thursday to try and restore confidence seemed unable to allay concerns that the problems in the financial markets was a portent of what lay in store for the wider economy.

Over the past week, the Fed has now injected $88bn (£44.3bn), while the European Central Bank has put up 211bn euros ($283.2bn; £142.6bn).

But the action of the central banks has been largely dismissed and tens of billions of pounds has now been wiped off the value of the UK's leading shares alone since last Wednesday, with financial and mining stocks the worst off.

SOURCE: BBC