Tuesday was "a rough day" on the Johannesburg Securities Exchange as global equities tumbled for a second day in a row, according to Sasfin's David Shapiro.

The JSE opened almost three percent down and by 3.42pm on Tuesday afternoon, it was 3.9 percent lower.

"A lot of concern is gripping the markets," Shapiro said.

"The big worry is the United States insurance giant AIG – the markets are wondering if it'll survive," he added.

"Investors are waiting to see if AIG will go the same way as the bankrupt American investment bank Lehman Brothers."

Shapiro said that there was no way of telling when the turbulence in global markets was going to end.

Fed to make rates decision

"We just have to let present circumstances pass."

He noted that the US's Federal Reserve would make a decision on interest rates on Tuesday evening, South African time.

"Markets are waiting for the Fed as they're saying that there's an 80 percent chance that it'll cut rates by a quarter of a percent. And markets are even saying that there is a six percent chance of a half a percent cut."

This was presently what the markets were betting on, he said.

"If the Fed cuts rates, it would send a signal that it is concerned about the economy and about consumers."

On Monday, Lehman Brothers filed for bankruptcy and Merrill Lynch was bought by the Bank of America, actions that made investors around the globe sell stocks.

The brokerage sector's troubles began with the collapse in the US housing market that, in turn, pushed down the value of commercial paper that had real estate as its backing asset.

When the worth of those asset-backed investments plunged, so did the financial prospects of the companies owning the underlying debt.

Sapa