Banks lead shares slump

Share This:

• 

Text size: A A A

Share prices have fallen in recent weeks, with financial service providers the hardest hit, the Bank of England reports.

In its quarterly bulletin for the three months to the end of February 2008, the Bank notes that equity markets in the UK have slumped in line with the global economy.

"The share prices of banks and construction companies experienced particularly marked falls since the previous bulletin," the Bank asserts.

"Contacts suggested that banks share prices fell sharply as worries about their profits and capital adequacy intensified."

In the light of recent events in the global financial services industry, many UK firms could find they have not yet emerged from the crisis.

Rumours of illiquidity at US investment bank Bear Stearns were initially denied by the institution last week.

However, president and chief executive officer Alan Schwartz revealed that the rumours soon became reality following concerns among stockholders.

"Amidst this market chatter, our liquidity position in the last 24 hours had significantly deteriorated," he said on Friday.

Bear Stearns subsequently revealed it is to be bought out by JPMorgan Chase at a valuation of $2 (99p) per share.

Following the news, the FTSE 100 slumped by two per cent, as reported by the Press Association.

Alternative investments such as oil and gold also responded with record high valuations seen on such commodities.

The scenes at Bear Stearns - with investors demanding their money back based on rumours in the media - could be seen as reminiscent of those which took place at Northern Rock branches across the UK.

Coincidentally, this week marks the six-month anniversary of the run on Northern Rock by those hoping to rescue their savings from the troubled institution.

Important Notice
This guide is intended for general information only and is not intended as, and does not constitute, any form of advice, recommendation or endorsement by us of any particular product(s) or services and you should rely on your own further research and professional advice in relation to your specific requirements and circumstances before purchasing any products or services. Use of this guide is subject to the Terms of Use of the KnowYourMoney site.