Dow Down 300 in Early Trading

The financial system remained on edge as another week dawned on the embattled canyons of Wall Street.

Stocks opened sharply lower on Monday, with the Dow Jones industrials down more than 300 points in the first half-hour of trading, even as federal lawmakers hammered out an agreement on the government bailout plan and Citigroup snatched up the core business of Wachovia, the ailing banking giant.

The latter move, which was spearheaded by federal regulators, could have been taken as a sign that the government was eager to restore stability to the financial system. But the near-collapse of Wachovia, which was the nation’s fourth-largest bank, may have underscored the troubling sense among investors that any bank is vulnerable in the current crisis.

And with the bailout plan still pending Congressional approval — and the Senate vote not scheduled until Wednesday — there were no guarantees that even a $700 billion bailout package would solve the ongoing problems.

As pressure continued on the world’s credit markets, the Federal Reserve announced a coordinated move with nine other central banks to vastly increase the amount of liquidity in the world financial system.

Money continued to flow into the safe space of Treasury bills and lending rates stayed high, signs that investors remained deeply ill at ease.

The Standard & Poor’s 500-stock index was down more than 3.6 percent shortly before 10 a.m. Shares of Wachovia lost 90 percent of their value overnight. Citigroup shares fell, and shares of Morgan Stanley and Goldman Sachs also traded lower.

The declines in New York came sharp drops in stocks across the world. The benchmark Hong Kong index plummeted 4.3 percent overnight; Tokyo’s Nikkei 225 lost 1.2 percent.

In Europe, stocks in London, Paris and Frankfurt were down around 3 percent in mid-afternoon trading.

President Bush appeared outside the White House at 7:30 a.m., before the markets opened, to endorse the bailout legislation that was agreed upon over the weekend.

“A vote for this bill is a vote to prevent economic damage to you and your community,” the president said in a brief statement. “The impact of the credit crisis and housing correction will continue to affect our financial system and growth of our economy over time. But I am confident that in the long run, America will overcome these challenges.”

The problems in Europe came after government bailouts of several banks, including the British lender Bradford & Bingley and the Belgian-Dutch financial group Fortis.

If anything, the moves created uncertainty about which institution would be next, said Jean Bruneau, a trader at Société Générale in Paris.

Shares of the Brussels-based lender Dexia fell 22.7 percent as investors worried that it might be the next bank to need government help. The company may soon announce a plan to raise capital, the French newspaper Le Figaro said, without citing a source.

The agreement on Capitol Hill on the terms of the bailout package failed to lift the mood in Europe.

“The U.S. bailout doesn’t change some negative short-term factors — that the economic outlook is weak and that the earnings outlook is weak,” said Tammo Greetfeld, a strategist at UniCredit Markets & Investment Banking in Munich. “The key question is can the bailout create enough optimism among investors that they focus on the medium-term improvement and ignore short-term weakness. We’re not there yet, the benefits look to be too far down the road.”

The dollar gained against the euro and the pound, and was stable against the yen.

Stock markets in Asia fell on renewed fears of a global credit crunch, erasing earlier gains that came after the weekend agreement on Capitol Hill.

The Standard and Poor’s/Australian Stock Exchange 200 Index fell 2 percent after rising slightly on Monday morning. The Kospi Index was down 1.3 percent after an early 1.2 percent surge in Seoul.

Bradford & Bingley, the British lender, was seized by the government after the credit crisis shut off funding and competitors refused to buy mortgage loans that customers are struggling to repay.

Banco Santander, the Spanish lender, will pay $1.1 billion to buy Bradford & Bingley branches and deposits, the Treasury said. Santander shares declined 2.8 percent to 10.61 euros. Shares in UBS, the Swiss bank, fell 7.7 percent.

The stock market in Taiwan was closed on Monday as Typhoon Jangmi passed directly over Taipei. Mainland China’s stock markets in Shanghai and Shenzhen are closed this week as part of a national holiday marking the establishment of China as a Communist country in 1949.

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