LEH bankruptcy sends global equities lower

European equities markets saw substantial declines Monday as Lehman Brothers (NYSE: LEH) declared bankruptcy and Merrill Lynch (NYSE: MER; TYO: 8675) allowed Bank of America (NYSE: BAC; TYO: 8648) to take it over.

The Lehman bankruptcy was forced after takeover talks with Bank of America and Barclays Bank (LSE: BARC; NYSE: BCS; TYO: 8642) fell through and the US government refused to extend a bailout to the company.

In London the FTSE 100 was down 3.92 percent to 5,204.2 while the FTSE 250 dropped 2.99 percent to 8,708.4.

The declines were led by banks, with HBOS (LSE: HBOS) down 17.46 percent and Royal Bank of Scotland (LSE: RBS; NYSE: RBS PRM) falling 12.2 percent, while mortgage lender Bradford & Bingley (LSE: BB) dropped 15.44 percent.

Miners were lower as commodities prices fell, led by Kazakhmys (LSE: KAZ) with a decline of 11.87 percent, while homebuilders were led lower by Taylor Wimpey (LSE: TW), which fell 15.28 percent.

There were gainers in London, led on the 100 by Capita Group (LSE: CPI), which specializes in business process outsourcing, with a gain of 2.42 percent.

Travel-related shares also saw some gains.

In the rest of Europe, the FTSE Eurofirst 300 was down 3.67 percent to 1,119.47 while the Dax fell 2.74 percent to 6,064.16, the CAC-40 was 3.78 percent lower to 4,168.97, and the IBEX dropped 4.5 percent to 10,899.

As with other regions, banks led the declines as Societe Generale (Euronext: GLE) fell 9.64 percent on the CAC-40 and Commerzbank (FWB: CBK) dropped 9.03 percent on the Dax.

Insurers were also lower as Allianz (FWB: ALV; NYSE: AZ) was 6.11 percent lower and Axa (Euronext: CS; NYSE: AXA) dropped 8.52 percent.

While many Asia-Pacific equities markets were closed for holidays Monday, those which remained open fell sharply, also due to the events surrounding the Lehman Brothers bankruptcy.

Banks were hurt the most, but builders were down in Taiwan on fears that the economic slowdown will hurt demand and insurers declined on continuing trouble for US insurer American International Group (NYSE: AIG).

In Australia, the Sydney Ordinaries fell 1.66 percent to 4,875 while the S&P/ASX200 was down 1.76 percent to 4,817.7.

The Straits Times Index was 3.27 percent lower to 2,486.55 in Singapore while India’s Sensex fell 3.35 percent to 13,531.27 and Taiwan’s Taiex dropped 4.09 percent to 6,052.45.

Tokyo’s markets, as well as those in Hong Kong and the rest of China and in Korea were closed for the day.

Wall Street was down in early afternoon trade, with the Dow Jones Industrial Average 2.41 percent lower to 11,147.12 while the Nasdaq Composite fell 1.54 percent to 2,226.52 and the S&P 500 dropped 2.27 percent to 1,223.26.

Most banks were lower, with Lehman Brothers down 93.21 percent at just before 1 p.m. New York time.

Bank of America was also down, by 16 percent, after it agreed to take over Merrill Lynch, but Merrill added 21 percent on the news.

Troubled insurer American International Group was down 56.1 percent.

The oil sector was lower after crude oil prices fell sharply on the news that damage by Hurricane Ike to oil facilities in the Gulf of Mexico and on the Gulf Coast of the United States was less than had been anticipated .

ExxonMobil (NYSE: XOM) was down 0.18 percent while Chevron (NYSE: CVX) dropped 1.53 percent.

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