Is SocGen the reason for stock market turmoil? by Zuzana Zelenakova

On Thursday, French bank Societe Generale exposed a fraud that cost it shocking $7 billion performed by a Paris-based junior trader. Just now everyone is wondering whether there is some connection between the SocGen case and the tumultuous situation on stock markets from Monday, which subsequently led to US Federal Reserve slashing interest rates aggressively on Tuesday. The fraud makes even the most famous rogue trader Nick Leeson's $1.4 billion rather insignificant in comparison. According to the company the rogue trades were made in 2007 and 2008. The bank announced that the fraudulent positions, which were discovered and investigated on January 19 and 20, had been closed as soon as possible. As a result a new light has been thrown on huge declines in European shares on January 21, when the value of top German, British and French shares lost over $350 million. "The huge amount of futures selling could be one reason why markets fell off a cliff on Monday, and maybe that was an ingredient in forcing the Fed to bring forward part of its interest rate cuts," said Andrew Bell, European strategist at Rensburg Sheppard. A Fed source later said that the bank had no knowledge of the fraud when it was making the decision about rate cuts on Monday.

related story: http://news.yahoo.com/s/nm/20080124/ts_nm/socgen_markets_dc;_ylt=AraKtgcr9YBa70eTePQ2aVys0NUE

by Zuzana Zelenakova for PocketNews (http://pocketnews.tv)

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