Investors edgy as US stocks fall

Investors are concerned that financial markets will remain volatile. US stock markets sank in early trade on fears the bailout of insurance giant AIG would not be enough to dispel the gloom engulfing the financial world. AIG's rescue and a potential takeover of UK lender HBOS had earlier boosted confidence in Asia and Europe. But markets were volatile as nervous investors tried to make sense of the dramatic events in recent days. The widely watched Dow Jones industrial average shed some 200 points, or 1.89%, to 10,850.10 in afternoon trade. Finance firms were among the main fallers on the Dow with Morgan Stanley 42% lower Goldman down shedding 22%. Meanwhile on the FTSE, shares in top UK mortgage lender HBOS, which has faced heavy selling this week, had a rollercoaster ride. HBOS shares fell some 50% before initially recovering after it emerged that it was in advanced talks to be taken over by Lloyds TSB, only to fall again later, slipping 20%. It has been a tumultuous week on financial markets, with significant changes in the financial landscape. Key events on Wednesday included: Beleaguered HBOS in merger talks with Lloyds TSB after a steep fall in its share price US insurance giant AIG being bailed out by the US government Volatile stock markets as global investors remain nervous Trading on the Russian stock exchange being suspended Barclays snapping up key assets from Lehman Brothers after its bankruptcy The FTSE 100 index of leading shares was down 1.85% at 4932.8 reversing earlier gains, with banking shares remaining volatile. I don't think anyone has got any or much confidence in market direction for more than a few days Darren Winder, Cazenove Shares in Barclays were up 5%, while Lloyds TSB shed 0.1%, reversing earlier gains, while Royal Bank of Scotland was down 10%. Topsy-turvy trade Trade is likely to remain rocky amid concern that financial system instability will continue after the dramatic events of the past few days. "I don't think anyone has got any or much confidence in market direction for more than a few days," said Darren Winder, a strategist at Cazenove. AIG's bail-out follows the collapse of US investment bank Lehman Brothers, which caused share prices to plummet across the world's financial markets. Another investment bank, Merrill Lynch, has been sold off to Bank of America. France's Cac 40 share index was down 0.24%, while Germany's Dax index was 0.64% lower, reversing earlier gains as Wall Street opened. Russia's stock exchange suspended trade following steep falls in shares. Asian shares had a mixed session. Stocks in Tokyo, Taipei, and Seoul all rose, although prices in Hong Kong, Shanghai and Australia lost ground. Japan's Nikkei 225 index ended up 1.2% at 11,749.79, having risen by as much as 2.3% earlier in the day. The index had hit a three-year low on Tuesday. Hong Kong's Hang Seng index ended down 3.6% at 17,637.19 points.