The rescue of erstwhile Wall Street high flier Bear Stearns has sparket a sell off in global equities.

US futures ahead of the bell point to hefty opening losses, with S&P futures down 30 points. Banks have been hit the hardest. In pre-market trade, Lehman Brothers slumped 20%, Goldman Sachs lost 8% and Merrill Lynch fell 6.2%

On Friday, JPMorgan Chase took over Bear Stearns in a Fed-engineered bailout. JPMorgan Chase paid just $2 a share. Just over a year ago the same shares were trading as high as $170. The deal means Bear Stearns won’t be forced to file for bankruptcy, and it is widely hoped that this will stave off a new crisis in the financial markets.

The Federal Reserve is to stump up $30 billion of Bear Stearns’ less liquid assets.

“Throwing ‘good money after bad’ is a moral hazard that everyone’s grandma knows to avoid,” says Adrian Ash. “And just like the truly historic credit bubble that created it, the endgame for today’s official response to this historic banking crisis looks as inevitable as it’s sure to prove painful.

“High inflation and a currency collapse, you say? As a rule, smarter investors spotting this trouble in good time can switch into hard currency to hedge their domestic inflation risk.”

“The floods of money coming out of the Fed aren’t tempting anyone,” says John Stepek. “What they are doing, unfortunately, is absolutely destroying the dollar.

“The only way is down for the dollar, and with every interest rate cut, the downward slide gets steeper.”