Wednesday, September 10, 2008

Lehman losses hit world stocks

Lehman losses hit world stocks

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World stocks have slipped after Lehman Brothers, the fourth largest US investment bank, reported a massive third-quarter loss of about $4 billion.

Lehman, the latest credit crisis casualty, had already reported losses of $2.4 billion in the second quarter.

The bank announced on Wednesday that it would be selling a majority stake in its investment management unit and spin off commercial real estate assets into a new public company.

No plans for an injection of fresh capital into the bank have been released after a Korean firm backed out of investing.

"This is an extraordinary time for our industry, and one of the toughest periods in the firm's history," Richard Fuld, Lehman's chief executive, said.

The investment bank has already taken $7 billion in credit-related write-downs and losses since the start of the global credit crisis.

World stocks, meanwhile, fell toward two-year lows on Wednesday as the problems faced by Lehman stoked concern that banks are struggling to rebuild capital and financial markets remain brittle.

Anticipating continued market upheaval, Christian Jimenez, president of Imene Investment partners in Paris, said: "Lehman's meltdown won't probably be the last negative episode of this credit crisis."

"The consequences of the troubles in the banking system will continue to drag the economy, and stocks will stay in the doldrums for a while before we see any durable rebound."

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