Lehman shares fall as merger hopes fade

Shares in Lehman Brothers plunged as hopes of a bid from Korea Development Bank (KDB) were dashed. Sources close to the state-owned KDB said that the bank was under pressure from the South Korean Government to abandon tentative merger talks, as the authorities prefer to concentrate their financial firepower on propping up the weakening won. KDB is understood to have been informed by government officials at the weekend that the financial commitment required to buy Lehman represented “a financial risk too far at a difficult time”. The Wall Street bank is seen as being in urgent need of an alternative partner or another source of funding. Its shares fell more than 6 per cent to $13.45.

Wall Street slides

Wall Street stocks ended the day lower amid worries about American International Group (AIG) and the wider financial sector and fears of falling exports in the United States. The New York-based AIG fell after an analyst’s decision to cut his price target on the world’s largest insurer. The Dow Jones industrial average closed down 241.80 points at 11,386.30, erasing a near-200-point gain from Friday.

US house prices drop

House prices in the United States fell 7.1 per cent in July compared with last year. The number of homes sold in the month rose 3.1 per cent to five million, but analysts said that this reflected increased sales of foreclosed homes at low prices, rather than a sign of recovery from the worst housing slump for decades.