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The only place unaffected by financial turmoil: Iraq

WASHINGTON — Fear and uncertainty were hot commodities in global markets Monday.

Stocks plummeted and currencies fell as shock waves from the Wall Street meltdown continued to reverberate across financial capitals.

The Mexican peso plunged to its lowest level in years. Its stock market dropped 5.4 percent.

Brazil and Russia temporarily halted trading after a series of steep drops on their exchanges.

Meanwhile, Sweden, Denmark and Austria joined Ireland and Germany on a growing list of European countries that have pledged to guarantee bank deposits to tamp down consumer worries.

"This is a stampede," said Valerie Plagnol, chief strategist at CM-CIC Securities in Paris.

On the very day that Washington began to unfold the $700 billion economic rescue mission, foreign governments and investors seemed resigned to a long period of tight credit and turmoil.

Russia suspended its benchmark RTS stock index twice on Monday, as it fell 19.1 percent, its worst ever one-day drop. It had already halted trading three times last Friday, hoping to slow sliding shares and capping the market's worst week in nearly a decade.

Russia on Monday also shut down its second major market, the Micex, three times. It had fallen nearly 19 percent.

The global credit crunch has compounded Russia's financial woes. It's already reeling from the one-two punch of falling oil prices and the loss of billions in foreign investment after the August war with Georgia.

In Latin America, the U.S. financial crisis caused trading on Brazil's stock exchange to be halted twice on a day when the value dropped by 8 percent.

In Argentina, stocks fell 10 percent, and currencies across the region tumbled against the dollar.

"The turmoil is really starting to hit Latin America," Jane Eddy, a senior regional specialist for ratings agency Standard & Poor's. "You have stock market drops, currencies weakening and credit really drying up. Everyone is on hold waiting to see what will happen over the next two weeks."

The uncertainty comes at a time when Latin America has been enjoying its strongest sustained economic growth in 25 years. The region grew by 5.7 percent in 2007 and was projected to grow by about 4.5 percent in 2008.

Thomaz Teixeira, a stock analyst at Socopa Corretora in Sao Paulo, said investors were not necessarily in a "panic."

"But they're selling for the sake of selling at whatever price," he said. "In time, though, we believe that the market will heal."

In South Africa, the stock market hit its lowest mark in more than eight years. Banks in Zimbabwe ran out of cash after depositors tried to pull out their money.

In Pakistan, already embattled on the political front, the rupee hit a new low against the dollar. With its currency having lost 21 percent of its value already this year, Standard & Poor's warned that the country was close to bankruptcy.

Next door, in India, stocks fell nearly 5.8 percent, the lowest close in two years. The index has shed more than 42 percent of its value this year, with foreign investors leading the retreat.

In response, the capital market regulator lifted curbs Monday on overseas investors to halt record sales by offshore funds.

In the Middle East, Kuwait pumped $374.3 million into the banking systems Monday and Saudi Arabia injected more $26 million into its stock market, local newspapers reported.

Apparently immune to all the turbulence was Iraq. The government has little if any investments in the institutions affected by the crisis and a barely functioning stock market. Most Iraqis keep their money in their homes rather than trust banks.

"We don't believe it will affect our bank balance," said Minister of Industry Fawzi Hariri. "In the short term we'll be one of the least affected nations."

The Iraqi government has more than $25 billion in cash reserves. Even with oil prices dropping below $90 a barrel, the Iraqis forecast oil revenues to be in the neighborhood of $80 billion.

(Contributing to this article were Tyler Bridges in Caracas, Venezuela; Tom Lasseter in Moscow; Lelia Fadel in Baghdad; Saeed Shad in Islamabad, Pakistan. Goldstein reported from Washington.)


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