(Agencies)
Updated: 2008-03-17 23:21

LONDON -- Global markets plunged Monday on news that JPMorgan Chase, backed by the US government, had to rescue troubled Bear Stearns and investors struggled to gauge how much worse financial markets could get.

TV crew interview a man in front of the digital stock indicator in Tokyo Monday, March 17, 2008. Japan's benchmark Nikkei stock index plunged 4.2 percent in the morning session Monday as the dollar hit a 12 1/2-year low against the yen. [Agencies]

"Its difficult to call where the bottom is," said Richard Hunter, a broker at Hargreaves Lansdown in London.

Oil prices hit a record in Asian trading, US stock index futures fell sharply and the dollar hit record lows.

JPMorgan said Sunday it would buy Bear Stearns for $236.2 million — $2 a share — in a stunning fall for one of the world's largest and most venerable investment banks. The bank was dragged down by its exposure to bad mortgages, the same burden that has led to more than $150 billion in write-downs worldwide.

The Bank of England on Monday offered an extra 5 billion pounds — around $10.1 billion — of reserves for short-term money markets because of the dire conditions.

The UK's benchmark FTSE 100 dipped 2.5 percent to 5,493.8 while France's CAC 40 slid 2.7 percent to 4,473.39. Germany's DAX slipped 3.4 percent. Financials were especially hard hit, with Switzerland's UBS down 14.5 percent.

The head of the International Monetary Fund said Monday that the global financial crisis is more serious and more widespread than even a few weeks ago.

The "economic environment is still worsening," said Dominique Strauss-Kahn.

Strauss-Kahn urged a global response, though he said central banks have been handling the crisis well.

Investors, however, were stunned by the latest bout of very bad news from Wall Street.

"There is persistent credit uncertainty. Market players have been repeatedly let down which shows the subprime mortgage problems are so deep-rooted," said Atsuji Ohara, global strategist of Shinko Securities in Tokyo.

Investors were already skeptical about the JP Morgan deal, which was completed with the backing of the US government.

"Just buying an investment bank does not solve the problem," Hunter said. "Markets are prodding (the US government) to inject public funds."

News of the acquisition of Bear Stearns stunned investors just before markets opened in Tokyo and Seoul. Both fell sharply before paring some losses in afternoon trading.

Japan's benchmark 225 index sank 3.7 percent to close at 11,787.51 points, its lowest in more than 2 1/2 years. Hong Kong's Hang Seng index fell 5.2 percent to finish at 21,084.61.

Across the Asia-Pacific region, all major stock indexes were down, including markets in Australia, China, South Korea, Indonesia and the Philippines. India's Sensex dropped 5.1 percent in afternoon trading.

"We are worried" about what comes next, Shim Jae-youb, a strategist at Meritz Securities in Seoul, said of concerns that other banks may collapse.

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