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While you were sleeping: BusinessWire overnight wrap

Tuesday 16th September 2008

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Wall Street tumbled, with the Standard & Poor's 500 Index dropping 4.7% to a three-year low, on the bankruptcy of Lehman Brothers and concern the world's biggest economy may be heading for recession.

Citigroup, the biggest US bank, fell 15% to $15.24. Bank of America, which has agreed to buy Merrill Lynch in an emergency bail-out, dropped 21%. Goldman Sachs fell 12% and Morgan Stanley declined 14%.

The S&P 500 fell 59 points to 1,192.70, the lowest level since October 2005. The Dow Jones Industrial Average fell 4.4% to 10,917.51.

The rout also smacked insurers. American International Group, known as AIG, dropped 61% and Washington Mutual fell 27%. AIG gained approval from New York state to put up $20 billion of policyholders' assets as collateral to try to avert a liquidity squeeze. State Governor David Paterson said the insurer will also be able to bend rules by shifting funds from its insurance units to its parent company.

Bloomberg News reported that Goldman Sachs and JPMorgan Chase are trying to arrange financing for AIG to plug a financing gap of as much as $75 billion. The Federal Reserve added $70 billion to the banking system to add stability in the wake of the bankruptcy of Lehman Brothers.

With the prospects of deteriorating economic conditions in the US, crude oil fell more than US$5 a barrel to reach US$95.71 in New York. London Brent crude fell $5.55 to US$92.03 a barrel.

The yen soared against the US dollar and the Swiss franc strengthened as investors eschewed riskier investments funded with loans in Japan's currency. The yen strengthened 2.8% to 104.92 per dollar in New York, from 107.94. The dollar fell 0.4% to $1.4280 per euro.

European shares also tumbled on Lehman's strife, led by financials. The FTSEurofirst 300 index fell 3.6% to 1,119.94 points.

US Treasuries surged on speculation the Federal Reserve will reduce borrowing costs this week to ease the financial crisis. The yield on two-year notes dropped 42 basis points to 1.78% in New York, according to BGCantor Market Data.

Gold and silver rallied as investors sought safe havens from the financial rout. Gold for December delivery climbed $22.50 to $787 an ounce on the New York Mercantile Exchange. Silver futures for December delivery rose 34 cents to $11.135 an ounce.

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