Enduring allure of Egyptian belly dance

The Ahlan Wa Sahlan festival has been a big hit this year

Hundreds of women of all nationalities sway their hips and twirl in time to the beat of a drum in a hotel ballroom by the pyramids in Cairo.

Belly dancing is said to have been practised in Egypt since Pharaonic times and now it has caught on around the globe.

It is well-established in Europe and the US and has recently spread to Asia. This year dozens of dancers travelled from China for the Ahlan Wa Sahlan belly dancing festival.

“Because this is the land of dance, women have to come!” declares Raqia Hassan, the festival organiser.

“When she comes she can meet famous dancers and musicians. She can see the pyramids. Anyone who comes to Egypt one time, she cannot stop coming back.”

Safa Bakr’s shop attracts women from all over the world

Raqia, who has taught many belly dancing celebrities, leads her large class through the basic moves of the dance putting together a routine.

“It’s fun and you can do this at any age,” says Ewa Horsfield from London. “You can express your own personality. It’s an individual dance. You just listen and respond to the music.”

Many speak of the fitness benefits of belly dancing.

“In China all ladies like for their health,” says Angel from Shanghai.

“This kind of dance began here. Here teachers [are] very, very good so all Chinese ladies want to come.”

Contradictions

Belly dancing is big business in Egypt thanks to the global market.

Designer, Safaa Yasser Bakr, runs a belly dancing costume shop in the historic Khan el-Khalili bazaar.

She helps a Brazilian woman try on a sky-blue sequinned bra and a matching skirt with a split up one side.

“In one show big stars change costume many times,” she tells her. “You need maybe five different pieces.”

Nowadays Safaa sells most of her alluring outfits to foreigners.

Safa sells her wares in Khan el-Khalili – Cairo’s Islamic heart

“I see people coming from France, Italy, United States, Argentina, Spain, Japan,” she says.

But in Egypt at large, many experts fear the dance is losing its appeal.

Society has become more religious and conservative over the past generation and belly dancing is not considered a respectable profession.

“I don’t like belly dancing. I don’t like to see a woman half-naked dancing and moving her body like that,” says one man on the street in central Cairo.

“It has a kind of sexual movement. That’s why I don’t like to watch it,” adds his friend.

An older passer-by remembers the famous dancers of the 1960s with affection but says he would not let his wife or daughters dance in public today.

“I liked the old belly dancer because you could not see a lot of her body,” he remarks. “They were very respectable – not like the new ones now.”

Enduring art

Dance historian, Mo Geddawi, accepts belly dancing is facing a challenging time in Egypt but says this must be seen in perspective.

“Forget about different governments and religion,” he says. “When Christianity and then Islam came the dance was taboo, but people continued to dance.”

“Sometimes in public it is less but the dance never died.”

For now though international devotees help to ensure the dance goes on.

Diana Esposito from New York came to Cairo on a scholarship to study the social and economic reasons for its decline but has become an accomplished belly dancer herself.

“The first time I saw it I thought the movements were so sensual,” she says. “I decided to try something new and it became an addiction.”

“I don’t see the dance being done properly anywhere else in the world. That’s why everyone flocks here – this is the capital of belly dance.”

Ban criticises G8 climate efforts

The summit has opened up to take in the so-called G5 nations

UN Secretary General Ban Ki-moon has criticised leaders of the G8 industrial nations for failing to make deeper commitments to combat climate change.

On Wednesday, the leaders, meeting in Italy, agreed to cut emissions by 80% by 2050, but Mr Ban said big cuts were needed sooner rather than later.

The leaders are set to meet their counterparts from emerging economies to discuss a new deal on global warming.

US President Barack Obama will chair the session, in the city of L’Aquila.

The second day of the summit has begun, opening up its discussions to take in the so-called G5 nations – Brazil, China, India, Mexico and South Africa. Egypt is a special invitee.

The G8 leaders said on Wednesday they had agreed to try to limit global warming to just 2C (3.6F) above pre-industrial levels.

That is the level above which, the United Nations says, the Earth’s climate system would become dangerously unstable.

The G8 leaders also said rich nations should cut emissions by 80% by 2050 while the world overall should reduce them 50% by 2050.

But correspondents say emerging nations appear reluctant to sign up and tough negotiations lie ahead.

‘Moral imperative’

Mr Ban said Wednesday’s agreement was welcome, but the leaders needed to establish a strong and ambitious mid-term target for emissions cuts by 2020.

“This is politically and morally imperative and a historic responsibility for the leaders… for the future of humanity, even for the future of Planet Earth,” he told the news.

Mr Ban said the leaders also had to come up with financial incentives for poorer countries to reduce pollution and aid to help them mitigate the effects of climate change.

President Obama will chair the Major Economies Forum meeting on Thursday afternoon.

The countries represented there account for some 80% of the emissions of gases that are blamed for global warming.

‘Still time’

Our diplomatic correspondent says, in L’Aquila, says the talks with India and China will be difficult.

China’s president has headed home to deal with the ethnic violence in Xinjiang, so there are now questions whether his delegation will be more cautious.

G8 KEY ISSUES/TIMETABLE THURSDAY: Climate Change Brazil, China, India, Mexico, South Africa, Egypt join talks 1230 GMT – Junior G8 1300 GMT – Major Economies Forum meeting FRIDAY: Development 0630 GMT – crisis’ impact on Africa with African leaders attending 0830 GMT – food security 1100 GMT – final news conference G8 members: Britain, Canada, France, Germany, Italy, Japan, Russia, US

Our correspondent adds that India is already complaining that the G8’s long-term targets for 2050 are too long-term and that G8 countries are ducking interim targets for 2020 which would make their 40-year ambitions more credible.

But in a meeting with Brazilian President Luis Inacio Lula da Silva, Mr Obama said there was still time to close the gap between developed and developing nations before UN talks on a new climate change treaty in Copenhagen in December.

The summit host, Italian Prime Minister Silvio Berlusconi, has said a deal should be all-inclusive.

“It would not be productive if European countries, Japan, the United States and Canada accepted cuts that are economically damaging while more than five billion people in other countries carried on as before,” he said.

The G8 summit began in L’Aquila on Wednesday, with the first day largely taken up with discussion of the fragile state of the global economy.

The leaders also issued a statement reaffirming that they were “deeply concerned” by Iran’s nuclear programme and condemning North Korea’s recent nuclear test and missile launches.

African leaders will join the summit on Friday to push for a new initiative to fund farming in the developing world and tackle global hunger.

North Korea missile tests defy UN

North Korea is thought to have thousands of missiles

North Korea has test-fired a series of missiles in an apparent act of defiance on 4 July, American Independence Day.

Reports say at least seven Scud-type ballistic missiles were fired, with a range of about 500km (312 miles).

South Korea and Japan called the latest tests, which follow several others in recent weeks, an “act of provocation”.

North Korea is banned from all ballistic missile-related activities under UN sanctions imposed after a second underground nuclear test in May.

South Korea’s Joint Chiefs of Staff (JCS) said the missiles were fired from one of the North’s east coast launch sites on Saturday morning.

All landed in the Sea of Japan, known in South Korea as the East Sea.

NORTH KOREA 2009 TESTS 4 July – Seven suspected ballistic missiles fired 2 July – four short-range cruise missiles launched 25 May – second underground nuclear test brings new UN sanctions 25/26 May – series of short-range rockets fired 5 April – N Korea says long-range rocket was satellite launch

“Our military is fully ready to counter any North Korean threats and provocations,” the JCS said in a statement.

A South Korean defence official said Saturday’s tests were of greater concern than four short-range ones on Thursday, as the missiles had longer ranges.

“Thursday’s missile tests were apparently made as part of a military drill but today’s launches, which came on the eve of the US Independence Day, are believed to be aimed at political purposes,” the official told Yonhap news agency.

The South Korean government condemned the launches for being in breach of the recent UN security council resolution.

A spokesman for the US state department, meanwhile, described North Korea’s behaviour as “not helpful” and urged it not to aggravate tensions, AFP news agency reported.

Nuclear warhead fears

The BBC’s John Sudworth in Seoul says the launches are seen there as part of North Korean efforts to ratchet up the tension.

The missiles’ estimated 500km reach – although still technically short-range – brings most of South Korea withing striking distance, our correspondent says.

Japanese and South Korean media have reported that North Korea may be preparing to launch an intercontinental ballistic missile.

Our correspondent says there are no signs that such a test could be imminent.

Pyongyang is banned from testing ballistic missiles under UN resolutions but launched a long-range rocket in April, which many governments saw as a thinly disguised test of Taepodong-2 missile technology.

There are fears that North Korea is trying to produce nuclear warheads small enough to put on missiles – but experts say this appears to be several years away.

After six-nation talks aimed at curbing North Korea’s nuclear ambitions broke down earlier this year, Pyongyang said it would “weaponise” its plutonium stocks and start enriching uranium.

On 12 June the UN Security Council approved a resolution allowing inspection of air, sea and land shipments in and out of North Korea suspected of carrying banned arms and weapons-related material.

The North has said it will treat any interception of its ships as a declaration of war.

Korea analyst Aidan Foster-Carter told the BBC that the international community will have to wait and see what North Korea wants, while reprimanding it and taking what action it can.

He believes that the political situation inside North Korea could be behind its recent behaviour.

There are questions over the health of leader Kim Jong-il, after his apparent stroke last year.

Reports suggest he has named his youngest son as his successor – and some analysts believe the recent bellicosity could be a show of strength aimed at securing domestic support for his plans.

Mumbai official offers to resign

Mumbai has been shaken by the attacks

The deputy chief minister of the Indian state of Maharashtra has offered to resign after criticism for failing to deal with the Mumbai attacks.

RR Patil said his decision was guided by his “conscience”.

Armed with guns and bombs, attackers targeted multiple locations on Wednesday, killing at least 172 people.

Meanwhile, on Monday Mumbai limped back to normality with markets, schools and colleges open and heavy traffic on the city’s streets.

On Sunday, Indian Prime Minister Manmohan Singh opened cross-party talks on setting up a federal agency of investigation after the attacks.

Home Minister Shivraj Patil resigned, saying he took “moral responsibility”.

Mr Patil’s resignation was accepted by the prime minister but an offer to resign from the national security adviser, MK Narayanan, was turned down.

Questions have been asked about India’s failure to pre-empt the attacks, and the time taken to eliminate the gunmen.

Two of Mumbai’s best five-star hotels – Taj Mahal Palace and Oberoi-Trident – and a busy railway station were among the high-profile targets which were hit.

The violence which began on Wednesday night finally ended on Saturday morning.

I looked back to see the waiter who was serving me getting hit by a bullet Shivaji Mukherjee Mumbai attack survivor

The attacks have increased tensions with Pakistan after allegations that the gunmen had Pakistani links.

Islamabad denies any involvement, but India’s Deputy Home Minister Shakeel Ahmad told the news it was “very clearly established” that all the attackers had been from Pakistan.

Indian troops killed the last of the gunmen at the Taj Mahal Palace hotel on Saturday.

‘Minor incidents’

“I have gone by my conscience and put in my papers,” Maharashtra Deputy Chief Minister RR Patil was quoted by news agency Press Trust of India as saying.

Public anger has been building up against Mr Patil ever since media reports that he made light of the terror attack by saying that such “minor incidents do happen in big cities”.

The minister also told a press conference that “the terrorists had ammunition to kill 5,000 people. But the brave police, security forces crushed their designs and reduced the damage to a much lesser degree”.

The claim has not been confirmed by the security forces.

Meanwhile, on Monday morning normal peak-hour traffic has been leading to jams in many places across the city.

Hotels across the city have tightened security with guests being frisked before being allowed entry.

Most hotels are not letting any vehicles enter as a precautionary measure.

Protests

On Sunday, Prime Minister Singh held a cross-party meeting in Delhi.

Mr Singh was quoted by Reuters news agency as saying he planned to increase the size and strength of the country’s anti-terrorist forces.

As few as 10 militants may have been involved in Wednesday’s assault which saw attacks in multiple locations including a hospital and a Jewish centre.

While the vast majority of victims were Indians, at least 22 foreigners are known to have died, including victims from Israel, the US, Germany, Japan, Canada, Australia, Italy, Singapore, Thailand and France. One Briton, Andreas Liveras, was also killed.

When coastguards boarded the vessel, they found… a satellite phone and GPS tracker that possibly belonged to the trawler’s crew.

Hundreds of people took to the streets of Mumbai on Sunday to protest at the perceived government failures.

Protesters said the authorities should have been more prepared for the attacks, and also questioned whether warnings were ignored and the time it took commandos to reach the scenes of the attacks.

Police continued on Sunday to sift through the debris in the Taj hotel.

They are also questioning the one attacker who was captured alive to try to establish who masterminded the assault.

Asia markets follow US share drop

Concerns are increasing over the scale of the slowdown

Asian markets have plummeted after the Dow Jones share index in New York fell to its lowest level in five years, amid fears of a protracted global recession.

Japan’s Nikkei index ended 6.8% down and Hong Kong’s main index fell 5.5%.

Data showing Japan’s exports to Asia dropped in October for the first time since 2002 added to fears over the scale of the economic downturn.

On Wednesday, Wall Street shares fell 5% after the US central bank slashed its economic growth forecasts for 2009.

‘No positives’

Japan and other Asian nations are heavily reliant on exports.

Sales to other Asia nations have helped to limit the impact for Japanese exporting firms suffering from lower demand from the US and Europe.

But exports to Asia fell 4% last month from a year earlier, showing the extent of the global slowdown.

Several East Asian countries – including Japan, Singapore and Hong Kong – are already in recession and the thought that the US may be about to join them has been enough to send shares tumbling across the region.

Share prices in Tokyo and elsewhere slumped

Bad news from the US worries Japanese firms like Toyota and Nintendo which usually depend on American consumers to make a lot of their profit, our correspondent adds.

“We’ve gone past the poor sentiment stage,” Miles Remington, head of Asian sales trading at BNP Paribas Securities in Hong Kong, told the Associated Press news agency.

“People are looking for any kind of positive and there are just no positives out there. Everyone seems to be united in the depressed global outlook. Whether it’s commodities or equities, everything seems to be on a downturn.”

US slowdown

On Wednesday, the US Federal Reserve said the country’s gross domestic product – the value of all goods and services – could be flat or grow only marginally this year, and might shrink in 2009.

It said positive economic growth was only likely to return in 2010 and predicted further interest rate cuts might be necessary.

Month-on-month US consumer prices fell by 1% in October – the biggest drop in 60 years – which has reinforced fears of rapid slowdown.

Car problems

Carmakers were among the biggest fallers as the Dow Jones average closed down 427 points at 7,997 on Wednesday – dropping below the 8,000-level for the first time since 2003.

GM shares were down 15% at a 66-year low, while rival Ford slumped to a 26-year low.

Prospects for an industry bail-out remain uncertain and politicians have been arguing over a compromise deal.

Chief executives from General Motors, Ford and Chrysler say the firms could collapse unless they receive aid fast – which could lead to millions of job losses across the US.

But the automakers have faced fierce questions on Capitol Hill about their request for a $25bn (£16.6bn) bail-out deal.

Investors are concerned about how a possible bankruptcy among US carmakers could further hurt an already fragile economy.

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House set for fresh bail-out vote

President Bush has said the bill is the best chance of rescuing the economy

The US House of Representatives is preparing to vote on a $700bn (£380bn) plan to rescue the US financial sector.

Party leaders are hoping the House, which stunned global markets by rejecting the initial plan, will follow the Senate and back a new version.

The House began debating the deal on Friday morning and is expected to vote later in the day.

The Senate bill added about $100bn in new tax breaks in the hope of gaining more support from House Republicans.

The New York stock exchange opened shortly after the debate began and the Dow Jones Industrial Average jumped more than 100 points in early trading.

But earlier in Japan, shares fell to a three-year low. The Nikkei index closed down more than 1.9%, its lowest level since May 2005.

In Europe, shares were relatively flat. In early afternoon trading the UK’s FTSE 100 was down just 18 points, France’s Cac 40 was down nine and Germany’s Dax up seven.

The financial volatility continued on Friday as US bank Wells Fargo announced it would buy troubled rival Wachovia in a $15.1bn (£8.5bn) deal.

The US also reported its biggest monthly job loss in more than five years.

Bush plea

In Washington, House Speaker Nancy Pelosi, a Democrat, has said no vote will be scheduled until the party feels it will pass.

NEW MEASURES IN BAIL-OUT BILL Increased protection for saving deposits Increased child tax credits More aid for hurricane victims Tax breaks for renewable energy Higher starting limits to alternative minimum tax

“We’re not going to take a bill to the floor that doesn’t have the votes. I’m optimistic that we will take a bill to the floor,” she said.

When the House first rejected the plan on Monday – by 228 votes to 205 – legislators had concerns about both the content of the plan and the speed with which they were being asked to pass it.

President George W Bush has since urged the House to back his revised bill.

The package is aimed at buying up the bad debts of failing institutions on Wall Street.

Both the Democratic and Republican parties are pressing their members in the House to swing behind the revised bill and party leaders expect it to pass.

This thing, this issue, has gone way beyond New York and Wall Street President George W Bush

Some members have called for more amendments, which opens up the prospect of further horse-trading up to the point at which votes are cast.

Pressure will particularly be applied to the 133 House Republicans who went against party affiliation to reject President Bush’s bill, correspondents say.

Tennessee Republican Zach Wamp, one of those who voted against the bill on Monday, said he would now vote in favor of the measure despite ordinary Americans remaining “as mad as heck” at the situation on Wall Street.

“You have got to do what you think is right. I thought the right thing Monday was to vote no. And I think the right thing to do tomorrow is to vote yes.”

The bill successfully passed through the Senate on Wednesday after it was amended to raise the government’s guarantee on savings from $100,000 to $250,000.

It also now includes tax breaks to help small businesses, expand the child tax credit and extend help to victims of recent hurricanes.

Most importantly, it extends the tax break aimed at boosting the provision of alternative energy such as wind farms.

It also includes a number of so-called “pork-barrel” measures including tax cuts for rum manufacturers in Puerto Rico and the owners of racetracks.

The additional cost of these unrelated tax breaks – which could add $100bn to the bill – have worried some fiscally conservative Democrats in the House of Representatives.

China astronauts braced for walk

China astronauts braced for walk

The spacecraft is now in a stable, circular orbit

China’s three astronauts have spent their first day in orbit preparing for the mission’s spacewalk.

A 42-year-old fighter pilot, Zhai Zhigang, is due to carry out the 20-minute manoeuvre at 1630 Beijing Time (0830 GMT) on Saturday.

It will be the first time Chinese yuhangyuan (astronauts) have ventured outside their spacecraft.

Their Shenzhou VII capsule soared into orbit on a Long March II-F rocket from Jiuquan spaceport in north-west China.

The rocket put the Shenzhou capsule in a near-circular orbit more than 300km above the Earth.

Mr Zhai is joined on the mission by two other “yuhangyuan” – Liu Boming and Jing Haipeng.

The astronauts have been training in a water tank

Zhang Jianqi, one of the chief engineers for China’s space programme, said keeping three men in the spacecraft, and then sending one outside, would be a “big test”.

“This is a big technological leap,” he told state-run news agency Xinhua.

“The risks are quite high. Sending up three astronauts is a jump both in quantity and quality.”

When Mr Zhai carries out his extra-vehicular activity (EVA), he is expected to wear a Chinese-made spacesuit thought to have cost between £5m and £20m ($10m-$40m).

1958: Base for spaceflights built at Jiuquan, in Gobi desert
April 1970: China launches its first satellite into space
1990-2002: Shenzhou I-IV are launched to develop systems
Oct 2003: The first manned space mission launches on Shenzhou V
Oct 2005: The Shenzhou VI mission takes two men into space
Oct 2007: Chang’e-1 orbiter sent on unmanned mission to the Moon

The yuhanguan will be tethered to the capsule with a cable that provides him with life support and a communications link with the spacecraft.

His back-up, Mr Liu, will monitor the activity, presumably to reel the spacewalker back inside if there is an emergency.

Mr Zhai will retrieve an externally mounted experiment and oversee the release of a satellite.

During their 68 hours in orbit, the astronauts will be able to enjoy an unprecedented choice of food. The menu includes spicy chicken with peanuts, shrimps and dry fruits.

“We have tried to make them taste like stir-fried dishes they have on Earth,” Chen Bin, who is in charge of food for the astronauts, told state-run news agency Xinhua.

At the end of the mission, the Shenzhou re-entry capsule will target a landing in north China’s Inner Mongolia Autonomous Region.

China became only the third nation after the United States and Russia to independently put a man in space when Yang Liwei, another fighter pilot, went into orbit on the Shenzhou V mission in October 2003.

Two years later, Fei Junlong and Nie Haisheng completed a five-day flight on Shenzhou VI.

According to the Associated Press, Xinhua posted an article on its website prior to the lift-off that was written as if Shenzhou VII had already been launched into space.

The article reportedly carried a date of 27 September and came complete with a dialogue between the astronauts.

Chinese media report that this latest mission is the “most critical step” in the country’s “three-step” space programme.

These stages are: sending a human into orbit, docking spacecraft together to form a small laboratory and, ultimately, building a large space station.

The Shenzhou VIII and IX missions are expected to help set up a space laboratory complex in 2010.

China launched an unmanned Moon probe last year about one month after rival Japan blasted its own lunar orbiter into space.

Japan minister quits in rice row

Mr Ota only took over his portfolio in August this year

Japan’s farm minister, Seiichi Ota, has tendered his resignation because of a food scandal involving tainted rice.

Mr Ota’s ministry has admitted it was told in January 2007 that a food company was distributing rice tainted with pesticide.

Mr Ota had earlier said he saw no need to make “too much of a fuss over it”.

It has since emerged that the rice, destined for industrial uses, was resold as a food product and served to the elderly.

The rice has been found to be tainted with pesticides and mould, and was known to be unfit for human consumption.

No-one has been reported as ill as a result of eating the rice; a government official said this was because the density of contaminants was low.

“I met Prime Minister [Yasuo] Fukuda and told him my decision to resign, considering the seriousness of the tainted rice problem for the society,” Mr Ota said.

Japanese broadcaster NHK said his resignation had been accepted.

Japan faces general elections soon, possibly as early as next month.

Contamination spreads

As information trickled out, it became clear that the bad rice was sold to more than 300 firms, including brewers, food ingredient wholesalers and sweet makers.

A government report released this week showed that the rice was imported from China, Vietnam and elsewhere, and intended for use in the making of glue and other industrial products.

Instead, the Osaka-based Mikasa Foods company sold the rice on to firms which used it for making foods that have been distributed to hospitals and care homes.

Young people have also been affected as the bad rice was used in making some snacks sold in convenience stores, and in school lunches.

Japanese media reported that police said on Wednesday that the president of one of the small companies that had bought the rice from Mikasa Foods, had committed suicide by hanging himself.

When Mr Ota’s ministry first heard of the tainted rice entering the food chain, he said it was unable to uncover any wrongdoing.

Mr Ota only took over the portfolio in August this year.

The minister has come under fire after admitting his ministry “overlooked” the illegal distribution of rice unfit for human consumption.

Our correspondent says Mr Ota is known for his slips of the tongue, such as his expressed confidence that no-one would die from eating tainted rice and that no fuss was necessary.

The senior bureaucrat at the agriculture ministry had already resigned.

Central banks release more funds

The extra funds are aimed at easing banking sector woes

Global central banks are pumping billions of dollars of extra funds into money markets in a co-ordinated move to lift the amount of credit available.

The move is the fourth such joint effort since December last year. It will see the US Federal Reserve inject a further $180bn (£99bn).

The Bank of England is releasing $40bn, while the European Central Bank is to provide $55bn.

The Bank of Japan and Swiss National Bank have announced similar moves.

‘Appropriate steps’

“These measures, together with other actions taken in the last few days by individual central banks, are designed to improve the liquidity conditions in global financial markets,” said the Bank of England.

“The central banks continue to work together closely and will take appropriate steps to address the ongoing pressures.”

It does help to release some of those immediate tensions that have been building up in the money market Ian Stannard, currency strategist, BNP Paribas

The central banks of South Korea, India, Canada and Australia have also released extra funds.

The co-ordinated move comes after four days of almost unprecedented turmoil in the global financial industry.

Firstly, US giant Lehman Brothers filed for bankruptcy protection, while compatriot Merrill Lynch lost its independence in a rescue takeover by Bank of America.

The US government has also had to bail-out insurance giant AIG, while in the UK, thousands of jobs are predicted to go at banking group HBOS following its sale to rival Lloyds TSB.

Major problem

Analysts said the latest move by the central banks should help to ease immediate fears.

“Obviously it does not tackle the underlying root causes of the problem, but it does help to release some of those immediate tensions that have been building up in the money market,” said Ian Stannard, senior currency strategist at BNP Paribas.

Koichi Haji, chief economist at NLI Research in Tokyo, said the co-ordinated move “shows how serious the problem has become”.

“I think the root cause was letting Lehman fail,” he said.

“That made investors reluctant to supply funds to their counterparts, particularly to the smaller banks.”

Investors cautious amid turmoil

Asian share prices have continued to fall as confidence remains low

European stocks rise in cautious trade as Lloyds TSB’s takeover of UK lender HBOS dispelled some of the gloom hanging over financial markets.

Asian shares had earlier fallen sharply on fears that more companies could fall victim to the global financial crisis.

London’s FTSE 100 index was up 0.8% at 4,951 points shortly after the open and France’s main stock index rose 0.6%.

In Asia, Tokyo’s Nikkei share index dropped by 2% while Hong Kong’s main stock index slid by 7%.

Share indexes in Shanghai, Taiwan and India fell by between 3 and 5%.

Hong Kong’s Hang Seng index dropped below the 17,000 mark and Australian shares closed 4% lower.

On Wednesday, the Dow Jones index of leading US stocks fell by more than 4%.

Flight to safety

Brokers in Japan say the markets are in freefall because investors fear the US government’s efforts to stop the turmoil in the financial system are not working.

As a result, investors are looking for safer places to put their money than stocks and shares.

Traders saw plummeting shares on Wall Street on Wednesday

Many Japanese institutions have assets insured by AIG, the insurance company that was rescued by the US government on Tuesday.

And in Singapore, for the second day running, hundreds of AIG policyholders queued up outside its offices trying to surrender or cancel policies they fear could turn out to be worthless.

Feverish speculation

The US Federal Reserve’s AIG rescue package followed the collapse earlier this week of 150-year-old US investment bank Lehman Brothers, which sent shockwaves through the world’s financial community and sparked a global share price plummet.

Another investment bank, Merrill Lynch, has since been sold off to Bank of America. And in the UK, HBOS is being taken over by Lloyds TSB in a £12.2bn deal.

There has also been feverish speculation about the future of two other leading US banks – Morgan Stanley and Washington Mutual.

The New York Times quoted unnamed sources as saying an auction for Washington Mutual was under way. The Wall Street Journal reported that both banking giant Citigroup and Wells Fargo had expressed an interest in a takeover.

Meanwhile the Reuters news agency reported that Morgan Stanley, the second largest US investment bank in the US which on Wednesday saw a quarter of its value wiped off its share price, had held preliminary takeover talks with Wachovia.

None of the companies involved has made any comment on the speculation and no negotiations can be confirmed.

Banks take action

The Bank of Japan has injected another 1.5 trillion yen ($14.4bn; £7.9bn) into money markets to help stabilise them. Australia took similar steps.

The Japanese central bank’s injection was the third consecutive day it had tried to shore up cash markets as the Nikkei trades at a three-year low.

Across Asia, central banks have already pumped $33bn into money markets this week in an attempt to allay investors’ concerns and ensure the supply of funds does not dry up.