US stocks closed lower on Friday, but recovered from steep losses earlier in the session after the Federal Reserve injected US$38 billion into the banking system. This managed to alleviate concerns among investors about tightening credit and fallout from the subprime mortgage market crisis.
On the share markets, the Dow closed down 31.14 or 0.23 per cent at 13,239.54. The S&P 500 finished little changed, up 0.55 or 0.04 per cent at 1,453.64, while the Nasdaq ended down 11.60 or 0.45 per cent at 2,544.89.
Among the corporate movers, Countrywide Financial said its allowance for credit losses climbed 97 per cent from the end of last year. Its stock finished off 2.8 per cent.
The largest US home lender also said trouble in the mortgage market seriously threatens its earnings and financial condition.
Meanwhile, Bear Stearns was off 3.4 per cent, Merrill Lynch dipped 0.7 per cent, Goldman Sachs declined 1 per cent and Lehman Brothers dropped 1.8 per cent.
Shares of Washington Mutual fell 2.2 per cent after the Seattle-based bank said liquidity in the secondary market for home loans and mortgage-backed securities has “diminished significantly”.
On the upside, Accredited Home Lenders skyrocketed over 45 per cent after saying it received most of the regulatory approvals needed to be acquired by Lone Star.
NYMEX light crude oil for September delivery dipped US 12c or 0.17 per cent to $71.47 a barrel.
COMEX gold for December delivery climbed US$8.80 or 1.31 per cent to close at US$681.60 an ounce.
On the other side of the Atlantic Britain's key share index posted its biggest fall in more than four years, as a lending squeeze that forced central banks to inject cash into the banking system spooked investors.
According to Reuters, HSBC, HBOS, Standard Chartered, Lloyds TSB, RBS and Barclays were down between 2.8 and 6.4 per cent.
But the biggest loser was British mortgage bank Northern Rock, which slumped 9.6 per cent.
Elsewhere, Man Group tumbled 9 per cent after a source familiar with the plans said the world's largest listed hedge fund group would delay the public offering of one of its funds, and on weakness in financial markets.
Worries that a credit squeeze would hurt global economic growth and decrease demand for commodities also weighed on metal and oil stocks.
BP fell 2.8 per cent and Royal Dutch Shell lost 3.3 per cent. Among the big miners, BHP Billiton lost 6.7 per cent and Rio Tinto sank 6.2 per cent.
The FTSE 100 closed down 232.9 or 3.71 per cent at 6,038.3 to book its biggest one-day percentage fall since May 2003.
Across the channel, share prices in Paris ended down as investors remained fearful that last Thursday's move by BNP Paribas to suspend three funds may be followed by more bad news on the deteriorating credit climate.
Shares in Frankfurt also closed lower on continued concerns that the US subprime credit market woes may put German banks' assets at risk.
In France, shares of BNP Paribas dropped 4.4 per cent, while Deutsche Postbank led blue chips lower in Germany, closing down 4.2 per cent.
The French CAC-40 finished down 176.15 or 3.13 per cent at 5,448.63, while the German DAX-30 closed at 7,343.26, down 110.33 or 1.48 per cent.
In Asia, Japan's Nikkei average closed at its lowest level in almost five months as worries about the US subprime mortgage market sparked selling of financial stocks.
Shinsei Bank finished down 9.9 per cent, while Aozora Bank lost 3.3 per cent.
The Nikkei ended the day down 406.51 or 2.37 per cent at 16,764.09, its lowest close since 16 March 2007.
Hong Kong share prices also closed sharply lower on investor fears resulting from the US subprime mortgage problems.
Among the big caps, China Mobile fell 3.8 per cent while HSBC dropped 1.7 per cent.
The Hang Seng closed down 646.65 or 2.88 per cent at 21,792.71.
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