Credit squeeze sparks global equity sell-off

Global equity markets fell yesterday as investors, spooked by the recent jitters in the credit markets, looked to take refuge in less risky stocks.

Share prices around the world plummeted yesterday, as the recent jitters in the leveraged loan market spooked investors into selling off riskier stocks.

The sudden disappearance of liquidity in the credit markets has made it almost impossible for the big investment banks to sell on the loans they have made to support large leveraged buyouts, leaving them stuck with billions of dollars of extra risk on their balance sheets.

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