The meltdown on Wall Street continued to reverberate around the globe yesterday, with financial authorities pumping billions of dollars into markets to keep the financial system working as one of the world's largest insurers struggled to survive.
Shares in American International Group (AIG), the latest financial titan to be staggered by the subprime mortgage crisis, plunged in New York after ratings agencies warned of a greater likelihood that the insurer would default on its debt.
The investment bank Goldman Sachs reported its biggest drop in profit since it went public in 1999.
The US Federal Reserve, meanwhile, said it would leave its key interest rate unchanged at 2 percent. There had been speculation that the Fed would cut the rate. US stock markets fell after the decision was announced.
"The problem is just the tremendous amount of perceived risk in the marketplace," said David Wyss, chief economist at ratings agency Standard & Poor's in New York.
"What we've seen is a big increase in the amount of worry about the health of major financial institutions since the bankruptcy of Lehman Brothers."
The wave of credit tightening is coursing through the world financial network, affecting even banks in the Gulf.
Lehman's failure on Monday and the sudden sale of Merrill Lynch to the Bank of America touched off the biggest decline on Wall Street since the September 11 terrorist attacks. Only two of Wall Street's independent investment banks remain standing on their own: Morgan Stanley and Goldman Sachs.
Worse, Lehman's and Merrill Lynch's failure has exacerbated a vicious cycle of sinking asset prices and deepening losses that have plagued the industry since the subprime mortgage crisis erupted last August. The more banks and other institutions sell assets to stanch the flow of red ink, the faster the value of their assets decline.
The latest evidence came yesterday from Goldman, which added to the gloom enveloping Wall Street by announcing that its fiscal third-quarter profit fell 71 per cent, to $810 million (Dh2,975bn).
"This is by far the worst financial crisis since the Great Depression, not as severe as the Great Depression but second only to it," Nouriel Roubini, a New York University economics professor, wrote on his blog yesterday. Predicting that the crisis would cost global financial institutions at least $2 trillion, he wrote: "The financial and banking crisis will be severe and last several years leading to a severe and persistent liquidity and credit crunch".
In an attempt to prevent that, the Fed pumped $50 billion into the US financial system yesterday, adding to the $70 billion injection on Monday. Worldwide, central banks put more than $200 billion into the wheezing global system. The Bank of Japan threw in 2.5 trillion yen in cash, followed by the European Central Bank with ?70bn and the Bank of England with £20bn.
While similar actions helped restore confidence last August and again in March, the concern in markets this time is whether such short-term liquidity would enable the world's financial institutions to stay afloat while they continue to suffer huge losses from mortgage lending and mortgage-backed derivatives.
On Monday, Standard & Poor's and other major credit ratings agencies downgraded their ratings on AIG, in response to indications that it might succumb to the same forces that brought down Lehman. After falling more than 60 per cent Monday, AIG's shares dropped 40 per cent more yesterday on concerns that the ratings downgrades would force AIG to pay out billions of dollars in collateral to creditors and other trading partners.
If AIG fails, bankers said it could be even more devastating to the broader financial industry than Lehman's failure. Lehman was a key player in equity and debt markets and a critical part of the global trade in derivatives. But AIG insures an estimated $441 billion in assets around the world. New York's governor, David Paterson, said in a television interview that the insurer probably only had a day left to procure the money it needs to avoid collapse. "This is a catastrophic problem waiting if we're unable to contain it," he said.
Compounding concerns about the impact of Lehman's sudden disappearance from global markets were worries that many banks stood to lose even more money on contracts they had with the failed firm.
Stocks in Tokyo, where the market was closed for a holiday during Monday's global rout, plunged yesterday after reports that some of the nation's biggest banks, including Mitsubishi UFJ Financial Group and Aozora Bank, had exposure to Lehman. The declines by Japanese financial stocks was the steepest since 1987's "Black Monday."
Stocks in the Gulf reflected shrinking confidence among investors. Dubai's benchmark index fell 2.2 per cent, led by the UAE's biggest bank, Emirates NBD PJSC. Saudi Arabia's Tadawul index slipped by 0.5 per cent. There were bright spots, however: Abu Dhabi's stock index rebounded by 0.4 per cent while Kuwaiti stocks jumped 1.7 per cent on news that the government planned to start buying shares to prop up prices.
Oil prices dropped by more than 5 per cent, to under $93 a barrel. Gold, which had rallied as investors sought a safe haven, retreated by 1 per cent, to $778.75 an ounce.
warnold@thenational.ae
THE BIO
Born: Mukalla, Yemen, 1979
Education: UAE University, Al Ain
Family: Married with two daughters: Asayel, 7, and Sara, 6
Favourite piece of music: Horse Dance by Naseer Shamma
Favourite book: Science and geology
Favourite place to travel to: Washington DC
Best advice you’ve ever been given: If you have a dream, you have to believe it, then you will see it.
Squid Game season two
Director: Hwang Dong-hyuk
Stars: Lee Jung-jae, Wi Ha-joon and Lee Byung-hun
Rating: 4.5/5
Skewed figures
In the village of Mevagissey in southwest England the housing stock has doubled in the last century while the number of residents is half the historic high. The village's Neighbourhood Development Plan states that 26% of homes are holiday retreats. Prices are high, averaging around £300,000, £50,000 more than the Cornish average of £250,000. The local average wage is £15,458.
The White Lotus: Season three
Creator: Mike White
Starring: Walton Goggins, Jason Isaacs, Natasha Rothwell
Rating: 4.5/5
More from Neighbourhood Watch:
COMPANY%20PROFILE%20
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Scoreline
Real Madrid 1
Ronaldo (53')
Atletico Madrid 1
Griezmann (57')
COMPANY PROFILE
Initial investment: Undisclosed
Investment stage: Series A
Investors: Core42
Current number of staff: 47
Traces%20of%20Enayat
%3Cp%3E%3Cstrong%3EAuthor%3A%3C%2Fstrong%3E%20Iman%20Mersal%3Cbr%3E%3Cstrong%3EPublisher%3A%3C%2Fstrong%3E%20And%20Other%20Stories%3Cbr%3E%3Cstrong%3EPages%3A%3C%2Fstrong%3E%20240%3C%2Fp%3E%0A
THE SPECS
Engine: 6.75-litre twin-turbocharged V12 petrol engine
Power: 420kW
Torque: 780Nm
Transmission: 8-speed automatic
Price: From Dh1,350,000
On sale: Available for preorder now
The%20specs
%3Cp%3E%3Cstrong%3EEngine%3A%3C%2Fstrong%3E%20Dual%20synchronous%20electric%20motors%0D%3Cbr%3E%3Cstrong%3EPower%3A%20%3C%2Fstrong%3E660hp%0D%3Cbr%3E%3Cstrong%3ETorque%3A%20%3C%2Fstrong%3E1%2C100Nm%0D%3Cbr%3E%3Cstrong%3ETransmission%3A%20%3C%2Fstrong%3ESingle-speed%20automatic%0D%3Cbr%3E%3Cstrong%3ETouring%20range%3A%20%3C%2Fstrong%3E488km-560km%0D%3Cbr%3E%3Cstrong%3EPrice%3A%20%3C%2Fstrong%3EFrom%20Dh850%2C000%20(estimate)%0D%3Cbr%3E%3Cstrong%3EOn%20sale%3A%20%3C%2Fstrong%3EOctober%3C%2Fp%3E%0A
Malcolm & Marie
Directed by: Sam Levinson
Starring: John David Washington and Zendaya
Three stars
Specs
Engine: Dual-motor all-wheel-drive electric
Range: Up to 610km
Power: 905hp
Torque: 985Nm
Price: From Dh439,000
Available: Now
2025 Fifa Club World Cup groups
Group A: Palmeiras, Porto, Al Ahly, Inter Miami.
Group B: Paris Saint-Germain, Atletico Madrid, Botafogo, Seattle.
Group C: Bayern Munich, Auckland City, Boca Juniors, Benfica.
Group D: Flamengo, ES Tunis, Chelsea, (Leon banned).
Group E: River Plate, Urawa, Monterrey, Inter Milan.
Group F: Fluminense, Borussia Dortmund, Ulsan, Mamelodi Sundowns.
Group G: Manchester City, Wydad, Al Ain, Juventus.
Group H: Real Madrid, Al Hilal, Pachuca, Salzburg.
Test
Director: S Sashikanth
Cast: Nayanthara, Siddharth, Meera Jasmine, R Madhavan
Star rating: 2/5
Company%20Profile
%3Cp%3E%3Cstrong%3EName%3A%3C%2Fstrong%3E%20HyveGeo%3Cbr%3E%3Cstrong%3EStarted%3A%3C%2Fstrong%3E%202023%3Cbr%3E%3Cstrong%3EFounders%3A%3C%2Fstrong%3E%20Abdulaziz%20bin%20Redha%2C%20Dr%20Samsurin%20Welch%2C%20Eva%20Morales%20and%20Dr%20Harjit%20Singh%3Cbr%3E%3Cstrong%3EBased%3A%20%3C%2Fstrong%3ECambridge%20and%20Dubai%3Cbr%3E%3Cstrong%3ENumber%20of%20employees%3A%3C%2Fstrong%3E%208%3Cbr%3E%3Cstrong%3EIndustry%3A%20%3C%2Fstrong%3ESustainability%20%26amp%3B%20Environment%3Cbr%3E%3Cstrong%3EFunding%3A%20%3C%2Fstrong%3E%24200%2C000%20plus%20undisclosed%20grant%3Cbr%3E%3Cstrong%3EInvestors%3A%20%3C%2Fstrong%3EVenture%20capital%20and%20government%3C%2Fp%3E%0A
Top 5 concerns globally:
1. Unemployment
2. Spread of infectious diseases
3. Fiscal crises
4. Cyber attacks
5. Profound social instability
Top 5 concerns in the Mena region
1. Energy price shock
2. Fiscal crises
3. Spread of infectious diseases
4. Unmanageable inflation
5. Cyber attacks
Source: World Economic Foundation
Real estate tokenisation project
Dubai launched the pilot phase of its real estate tokenisation project last month.
The initiative focuses on converting real estate assets into digital tokens recorded on blockchain technology and helps in streamlining the process of buying, selling and investing, the Dubai Land Department said.
Dubai’s real estate tokenisation market is projected to reach Dh60 billion ($16.33 billion) by 2033, representing 7 per cent of the emirate’s total property transactions, according to the DLD.
UAE currency: the story behind the money in your pockets
The smuggler
Eldarir had arrived at JFK in January 2020 with three suitcases, containing goods he valued at $300, when he was directed to a search area.
Officers found 41 gold artefacts among the bags, including amulets from a funerary set which prepared the deceased for the afterlife.
Also found was a cartouche of a Ptolemaic king on a relief that was originally part of a royal building or temple.
The largest single group of items found in Eldarir’s cases were 400 shabtis, or figurines.
Khouli conviction
Khouli smuggled items into the US by making false declarations to customs about the country of origin and value of the items.
According to Immigration and Customs Enforcement, he provided “false provenances which stated that [two] Egyptian antiquities were part of a collection assembled by Khouli's father in Israel in the 1960s” when in fact “Khouli acquired the Egyptian antiquities from other dealers”.
He was sentenced to one year of probation, six months of home confinement and 200 hours of community service in 2012 after admitting buying and smuggling Egyptian antiquities, including coffins, funerary boats and limestone figures.
For sale
A number of other items said to come from the collection of Ezeldeen Taha Eldarir are currently or recently for sale.
Their provenance is described in near identical terms as the British Museum shabti: bought from Salahaddin Sirmali, "authenticated and appraised" by Hossen Rashed, then imported to the US in 1948.
- An Egyptian Mummy mask dating from 700BC-30BC, is on offer for £11,807 ($15,275) online by a seller in Mexico
- A coffin lid dating back to 664BC-332BC was offered for sale by a Colorado-based art dealer, with a starting price of $65,000
- A shabti that was on sale through a Chicago-based coin dealer, dating from 1567BC-1085BC, is up for $1,950
SPECS
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'Cheb%20Khaled'
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MORE ON CORONAVIRUS & THE ECONOMY
Key facilities
- Olympic-size swimming pool with a split bulkhead for multi-use configurations, including water polo and 50m/25m training lanes
- Premier League-standard football pitch
- 400m Olympic running track
- NBA-spec basketball court with auditorium
- 600-seat auditorium
- Spaces for historical and cultural exploration
- An elevated football field that doubles as a helipad
- Specialist robotics and science laboratories
- AR and VR-enabled learning centres
- Disruption Lab and Research Centre for developing entrepreneurial skills
In numbers: PKK’s money network in Europe
Germany: PKK collectors typically bring in $18 million in cash a year – amount has trebled since 2010
Revolutionary tax: Investigators say about $2 million a year raised from ‘tax collection’ around Marseille
Extortion: Gunman convicted in 2023 of demanding $10,000 from Kurdish businessman in Stockholm
Drug trade: PKK income claimed by Turkish anti-drugs force in 2024 to be as high as $500 million a year
Denmark: PKK one of two terrorist groups along with Iranian separatists ASMLA to raise “two-digit million amounts”
Contributions: Hundreds of euros expected from typical Kurdish families and thousands from business owners
TV channel: Kurdish Roj TV accounts frozen and went bankrupt after Denmark fined it more than $1 million over PKK links in 2013
UAE currency: the story behind the money in your pockets
The bio
Date of Birth: April 25, 1993
Place of Birth: Dubai, UAE
Marital Status: Single
School: Al Sufouh in Jumeirah, Dubai
University: Emirates Airline National Cadet Programme and Hamdan University
Job Title: Pilot, First Officer
Number of hours flying in a Boeing 777: 1,200
Number of flights: Approximately 300
Hobbies: Exercising
Nicest destination: Milan, New Zealand, Seattle for shopping
Least nice destination: Kabul, but someone has to do it. It’s not scary but at least you can tick the box that you’ve been
Favourite place to visit: Dubai, there’s no place like home
Company%C2%A0profile
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COMPANY%20PROFILE
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COMPANY PROFILE
Name: Kumulus Water
Started: 2021
Founders: Iheb Triki and Mohamed Ali Abid
Based: Tunisia
Sector: Water technology
Number of staff: 22
Investment raised: $4 million