ANALYSTS' VIEW: Lehman files for bankruptcy

SINGAPORE (Reuters) - Lehman Brothers Holdings filed for bankruptcy protection on Monday, while Bank of America announced it will buy Merrill Lynch, in latest developments in the troubled U.S. financial sector.

Meanwhile, the U.S. Federal Reserve and major banks announced steps to mitigate market volatility.

ANALYSTS' COMMENTS

MARCO ANNUZIATA, GLOBAL CHIEF ECONOMIST, UNICREDIT, LONDON

"There is now speculation that the Fed might decide an emergency rate cut to help the market absorb the stress this cannot be excluded if signs of meltdown materialise, but we think the Fed will try to avoid this step, which would be a reversal of the previous shift to more targeted measures.

"The US Treasury has decided it was time for shock therapy, and taken an extremely gutsy gamble by letting Lehman fail, against widespread expectations that a solution would be brokered over the weekend. The financial system now faces the unprecedented challenge of absorbing the unwinding of a major broker. If it works, it should boost considerably the hopes that the global financial system can work itself out of the year-long crisis. But the risk is enormous.

"As markets open in Europe today, we can expect equity markets to take a hammering, with major safe haven flight to government bonds and gold. The USD will likely be under pressure given the major question marks on the US financial system, to the benefit of safe haven currencies like CHF.

"We are witnessing a turning point in the modern history of the financial system, as three major brokers have now disappeared from the scene. The coming days and weeks will be truly crucial to the global economic outlook."

JUSTIN URQUHART STEWART, INVESTMENT DIRECTOR AT 7 INVESTMENT