September 09, 2008
5:15pm UK, Monday September 08, 2008
A computer glitch at the London Stock Exchange left City traders unable to cash in on a worldwide share boom for much of the day.
Technical glitch hit trading
Trading was halted soon after UK stocks rallied in the morning following the bail-out of US mortgage giants Fannie Mae and Freddie Mac, and only resumed seven hours later.
Officials said they had suspended connections to its trading system after some clients experienced difficulty accessing market data.
The glitch hit as the FTSE 100 Index - which measures the share prices of the UK’s top 100 companies - roared ahead nearly 4% thanks to a US rescue package of the troubled mortgage firms.
There was half an hour’s trading late in the afternoon before the Footsie closed up 3.92% at 5,446.30.
Some of the UK’s biggest banking stocks surged to double-digit gains.
The American government intervention helped soothe market fears over the fate of the two companies, which own or guarantee more than five trillion US dollars (£2,800bn) worth of mortgages between them.
On Wall Street, the Dow Jones industrial average started up around 2% - a day after the nationalisation announcement.
Fannie and Freddie nationalised
The US government’s move has offered hopes that a further slump in the US housing market might be prevented.
Freddie Mac and Fannie Mae have lost billions of dollars because of the US sub-prime crisis and the global credit crunch, and their share prices have fallen by 90% in the past year.
They are being temporarily taken over by the US government in the largest state bail-out in history.
The companies are being placed in a “conservatorship” to help the financial system recover from massive housing losses, officials said.
Fannie Mae And Freddie Mac Explained
The US Treasury said it was prepared to invest $100bn (£50bn) each to shore up Fannie Mae and Freddie Mac.
The past year has seen market confidence wane as property prices have plummeted in the worst US housing slump in decades.
Fannie Mae and Freddie Mac own or guarantee around half America’s total mortgage market.
If they had failed, it would have caused economic collapse not just in the United States
Read analysis of bail-out by Sky business editor Michael Wilson.
President Bush said the giants posed an “unacceptable risk” to the financial system.
The news about their nationalisation sent Asian stock markets soaring overnight, with Japan’s benchmark Nikkei 225 up 3.4% and Hong Kong’s Hang Seng showing gains of almost 4%.
