Lehman Brothers Bank

Unabated stock sell-off deepens global crisis

BEAR TERRITORY Many global markets were reported to have entered bear market territory on Tuesday after one of the worst days on Wall Street since the collapse of Lehman Brothers in 2008. At left, a brown bear receives food at the Safari park in Fasano, Italy, on Aug. 4. Above, a broker at the stock market in Frankfurt, Germany, covers his face on Monday as share prices took a beating. AP/ AFP

BEIJING/SINGAPORE—The global economy stumbled deeper into crisis as stock markets slumped further on Tuesday, with investors losing confidence that the United States and Europe can rein in their debt burdens quickly and avert a double-dip recession.

Even as Asian stock markets pulled back from another day of staggering losses as they closed, European shares tumbled for an eighth session running, with news of an unexpected drop in British factory output in June highlighting the weakness of the economy.

The worsening market trauma has piled pressure on the US Federal Reserve to announce fresh measures of support for the world’s No. 1 economy at a regular policy meeting on Tuesday, but analysts said the Fed’s options are limited.

“You’ve got to a situation of capitulation and panic selling, and these things will keep running until we get some sort of policy response,” said Peter Hickson, managing director of global commodity research at UBS.

“Even policy response these days seems to be impotent in terms of the market sentiment at the moment. The market is asking whether policy makers have many more bullets to fire,” Hickson added.

Investors fear that, with confidence in the global economy’s prospects evaporating, financial markets will remain in a slump, feeding a vicious circle of pessimism.

The fear among investors has reached epidemic proportions, with the sell-off erasing $8.1 trillion—or 14.8 percent of market capitalization—from global stock markets since July 24.

Dumping equities, investors rushed for perceived safety in the Japanese yen, Swiss franc and gold—which hit another record high of $1,770/ounce on Tuesday.

MSCI’s all-country world index declined further 1.2 percent, and has now shed about 20 percent since peaking in May. The market rule of thumb is that a fall of that magnitude constitutes a “bear market.”

‘Weary resignation’

Monday saw the US market’s worst showing since December 2008. The Dow Jones industrial average fell 5.6 percent, and the Standard & Poor’s 500-stock index dropped 6.7 percent.

When, and How, Lehman's Holdings Could Dispose of Archstone ...

By Erika Schnitzer, Managing Editor

Englewood, Colo.—Recent reports indicate that Lehman Brothers, Barclays and Bank of America will be pushing forward on plans to either sell or list Archstone, which Lehman purchased for $22 billion in 2007.

“It had always been the plan, when Tishman Speyer bought Archstone with Lehman Brothers, that they would consolidate the business, increase the amount of development and go public again at some part in the future,” recalls says Jack Kern, managing director of Germantown, Md.-based Kern Investment Research LLC and former head of research at Archstone-Smith. “This side road that Archstone ended up taking was the nature of the change in the economy and unforeseen consequences of Lehman Brothers paying an excessive amount of money for the company.

“Barclays has come out and said they don’t want to wait anymore to see whether Archstone will continue to improve and whether the real estate economy will grow to the point where it will be able to recoup most of their investment,” Kern tells MHN . “They feel that the values of the Archstone properties are as high right now as the foreseeable future and they just don’t want to wait any longer to see. Archstone, in fact, continues to perform at a high level and continues to generate sufficient cash through its net operating income to meet its obligations.”