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August 9th, 2007 at 5:16 am
Asia and European Markets – U.S.-Subprime Problems Spread to Europe, Dragging Stocks Down
European stocks sank at the open Thursday after French bank BNP Paribas said it was suspending subscription and redemption of three funds because of the turmoil in the U.S. subprime mortgage market. The lack of liquidity in the U.S. mortgage market made it “impossible to value certain assets fairly” and value the funds fairly, BNP Paribas said in a statement.
The yield on the German 10-Year bund fell 20 points shortly after the announcement as investors sought safe-haven positions, and the dollar fell sharply against the yen.
Asian Markets Mostly Higher
Asian markets continued their advance in the afternoon session Thursday with regional shares reaching their highest in more than a week. Australia, Japan and South Korea all closed with gains.
A fall in the yen further propelled Japanese exporters such as Canon. The Federal Reserve’s positive outlook on the U.S. economy this week helped whet appetite for riskier assets, weighing on the low-yielding Japanese currency, a favorite vehicle for carry trades. In carry trades, investors borrow in low-interest rate currencies, such as the yen, to invest in higher-yielding, riskier assets.
Markets in Singapore are closed for a public holiday. They will re-open Friday.
China’s Shanghai Composite Index climbed nearly 2% to a fresh record high as financial shares surged while steel and base metals recovered from Wednesday’s tumble.
http://www.cnbc.com/id/20185535