Lehman bankruptcy, capital woes slam futures

NEW YORK (Reuters) - Stock index futures tumbled on Monday as the bankruptcy filing by U.S. investment bank Lehman Brothers and cascading fears about the stability of other major financial institutions rattled global markets.

The slide in equity futures suggested that major Wall Street indexes were likely to slump 3 percent or more at the market's open. The diminishing appetite for risk drove investors toward the relative safety of government debt.

Shares of financial services companies, including American International Group, were poised to lead the market slide that is set to heighten worries about the impact of the credit crisis on the economy and the profit outlook.

AIG, along with leading brokerage Merrill Lynch & Co, are among other companies threatened by the credit maelstrom. Before the bell, AIG shares slumped 43 percent to $6.85, while those of Lehman plummeted 88 percent to 41 cents.

Following a failed last-minute scramble to find a buyer over the weekend, Lehman sought bankruptcy protection early on Monday, weighed by losses spawned by the U.S. mortgage crisis. The bankruptcy petition makes Lehman the largest and highest-profile casualty of the global credit crisis that began more than a year ago.

S&P 500 futures slid 47.50 points and were below fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures tumbled 348 points and Nasdaq 100 futures dropped 46.50 points.

Shares of Merrill Lynch, which at the weekend agreed to be bought by Bank of America, the No. 2 U.S. bank, however, were up 36 percent at $23.20 in pre-market trade. Bank of America shares dropped 14 percent to $29.05 before the bell.

Lehman's bankruptcy was also fueled by the U.S. government's decision to balk at giving any financial guarantees for any Lehman deal. In March the government provided financial backing for the takeover by JPMorgan of Bear Stearns, which became the first Wall Street high-flier to buckle under the credit turmoil.