Global Markets Fall Sharply As Recession Fears Mount

Global stock markets skidded Monday as concerns about the widening fallout from the credit crisis fueled fears about a global recession.

A spate of bank rescues in Europe heightened fears about the stability of global financial institutions.

Financial shares were poised to lead the slide on Wall Street after markets tumbled in Asia overnight.

In Europe major indexes were off about 5 percent despite a push by Germany, Austria and other governments to reassure depositors about their funds.

And with signs that the credit markets remain strained, investors scurried toward the relative safety of government debt.

"We are headed for a sharply lower open. The fear of contagion is spreading on a daily basis, and that's why we are lower," said Peter Cardillo, chief market economist at Avalon Partners in New York.

"We are not seeing any real shift in interbank cost of borrowing, which basically means that credit markets are still locked up."

Expectations that the global sell-off might spark coordinated interest rate cuts by global central banks helped futures pare some of their losses.

"The markets themselves are going to force some sort of coordinated action," said Cardillo.

A drop in oil prices below $90 a barrel underscored fears about the toll of the credit crisis on the outlook for global economic growth, said Cardillo.

He added that investors doubted that there would be immediate benefits from the $700 billion U.S. financial sector rescue plan passed by Congress Friday as questions about how it will be

In a bid to stave off further turmoil, France's BNP Paribas agreed to buy assets of troubled banking and insurance company Fortisin Belgium and Luxembourg for 14.5 billion euros ($19.71 billion).

 

 

Over a frantic weekend, German officials clinched a revised rescue deal for lender Hypo Real Estatethat will see commercial banks and insurers provide 15 billion euros in liquidity, on top of an initial pledge of 35 billion euros.

In the United States, the Federal Reserve was pushing Citigroup Incand Wells Fargo & Coto compromise over their competing bids for hobbled U.S. bank Wachovia Corp that could result in them carving up its assets, people familiar with the matter said.

Wall Street ended its worst week in seven years with another tumble on Friday on fears the financial rescue plan may not unblock credit markets and stave off recession