World stock markets sunk on Monday morning amid a tidal wave of disastrous news out of Wall Street that pointed towards rougher seas ahead.
Although markets in Tokyo, Shanghai, Seoul, and Hong Kong were closed for holiday, the Sydney All Ordinaries and the stock exchange in Taipei headed down as trading advanced early Monday morning. The BBC Global 30 was also down in early Monday trading.
Stock markets slid in Europe as news of American woes circulated out across the world in early trading on Monday. Currencies fluctuated, but remained stable by mid-morning and investors, who weren't sitting on their hands or nervously checking their Blackberries, headed for the relative safety of government-backed securities in the hope of stymying erosion in their portfolios amidst a widening world financial crisis.
The Dow Jones Industrial Average (DJIA) was expected to plunge up to 300 points or more at the open of frenzied trading in New York hard on the heels of this weekend's fantastic financial developments.
REUTERS reported yesterday that an "extremely... rare" trading session opened Sunday afternoon between 2:00 PM and 4:00 PM ET to allow Wall Street dealers in the derivatives market to reduce their exposure ahead of an apparent bankruptcy filing by Lehman Brothers Holdings, Inc. (NYSE: LEH). The BBC is reporting that Lehman Brothers is "set to go into insolvency."
The $455 trillion derivatives market is vulnerable to collapse should the anticipated bankruptcy filing by Lehman, the country's fourth largest investment house, materialize late Sunday or Monday morning.
A Google search by a reporter could not identify a previous occasion when an emergency trading session had been conducted on a Sunday.
The International Swaps and Derivatives Association (ISDA), according to REUTERS, announced "[t]rading involved credit, equity, rates, foreign exchange and commodity derivatives."
The ISDA, REUTERS reported, "...confirmed a 'netting trading session' was taking place for over-the-counter derivatives, in which trades that offset each other are settled."
REUTERS quoted Mohamed El-Erian, the CEO of PIMCO, the biggest global bond fund, saying, "This is an extremely, and I stress extremely, rare event. It also speaks to the more general notion that, in today's highly disrupted financial markets, the unthinkable is thinkable."
Concern over Lehman Brothers status began peaking last week after the company's stock lost 80% of its value following volatile trading on the market.
At 6PM on Friday evening, Timothy F. Geithner, President of the New York Federal Reserve Bank, Treasury Secretary, Henry Paulson; SEC Chair Christopher Cox, and CEOs from major Wall Street financial firms, including James Dimon (JP Morgan), John Mack (Morgan Stanley), Lloyd Blankfein (Goldman Sachs), Vikram Pandit (CitiGroup), John Thain (Merrill Lynch), and representatives from the Royal Bank of Scotland and the Bank of New York Mellon met in an emergency meeting in Lower Manhattan to discuss Lehman's fate and to try to stave off the firm's collapse and liquidation.
Conspicuously absent from the talks was Richard S. Fuld, Jr., Chairman and Chief Executive Officer of Lehman, who just last week stated that the investment bank was well-funded and its assets were undervalued.
Various officials continued meeting into the weekend, on both Saturday and Sunday, to attempt to negotiate either a sale of Lehman's or a potential buy-out by a consortium of large financial firms. Those talks have apparently failed leaving the question of the fate of Lehman Brothers Holdings, and the world's financial markets, in doubt.
On Saturday, Germany's Finance Minister, Peer Steinbruek, expressed sharp concern about Lehman's status before a meeting of EU finance ministers in Nice, France. Germany is the European Union's largest economy.
European worries over the health of the US economy stemmed from the prevailing view that "[m]any countries in the euro-zone are sliding toward recession -- that at least is the forecast of the European Commission," Der Spiegel online noted last Wednesday. To the extent that American problems spill over into the global financial system, European economies are negatively impacted.