Expert Warns Investor "Panic" Pushing Markets Into Global Depression

October 9, 2008 11:33 p.m. EST

New York, NY (AHN) - Analysts are warning clients that further instability on Wall Street could push European and Asian markets even lower.

"What we are witnessing is mass selling on a global scale due to a combination of sheer panic and fear, combined with complete uncertainty over the future of the world's major economies," GTF Global Market U.K.'s Head of Derivatives Martin Slaney tells AHN. "Investors are effectively pricing in the possibility of a global depression."

"Following the vicious sell-offs we have seen overnight in U.S. and Asian stocks, we expect the FTSE to open down approximately 7 percent, or over 300 points lower" on Friday, Slaney added.

Meanwhile, banks accessed the Federal Reserve's emergency lending facility at record amounts the past week. Commercials banks averaged $75 billion in daily borrowing, far topping last week's record of $44.5 billion.

As the commercial paper market locks up, banks and brokers have turned to the Fed's lending facility, which allows them to access 28 day loans and use risky investments as collateral, such as mortgage backed securities.

Wednesday saw the largest one day draw on record as $98 billion was borrowed. Identities of the banks accessing the facility are not released. Banks are now paying 1.75 percent on the 28 day loans.

AHN's Mitchell Jaworski contributed to this report.