(Reuters) - Stock index futures were down sharply early on Monday, pointing to a steep fall at the opening on Wall Street after Lehman Brothers (LEH.N: Quote, Profile, Research, Stock Buzz) filed for Chapter 11 bankruptcy protection, heightening fears over the embattled financial sector.
* By 4:22 a.m. EDT, S&P 500 futures, Dow Jones futures and Nasdaq 100 futures were down between 2.8 percent and 3.4 percent.
* Lehman filed for bankruptcy protection on Monday, making it the largest and highest-profile casualty of the global credit crisis.
The Chapter 11 filing did not include its broker-dealer operations and other units, such as asset management firm Neuberger Berman. Those businesses will continue to operate, although Lehman is expected to liquidate them. It said it is in advanced talks on selling its investment management division.
* Lehman shares traded in Frankfurt (LHMH.F: Quote, Profile, Research, Stock Buzz) were down 80 percent, while shares in Morgan Stanley (MS.N: Quote, Profile, Research, Stock Buzz) (MWD.F: Quote, Profile, Research, Stock Buzz), Goldman Sachs (GS.N: Quote, Profile, Research, Stock Buzz) (GS.F: Quote, Profile, Research, Stock Buzz) and Citigroup (C.N: Quote, Profile, Research, Stock Buzz) (TRV.F: Quote, Profile, Research, Stock Buzz) traded in Frankfurt were down between 7.4 and 15.2 percent.
* The U.S. dollar tumbled in Asian trade on the news that triggered talk of a possible Federal Reserve rate cut.
* The Federal Reserve launched a series of emergency measures on Sunday to calm financial markets and ease any trading disruptions that could arise from a collapse of Lehman.
One of the biggest changes the Fed made was to accept equities as collateral for cash loans at one of its special credit facilities, the first time that the Fed has done so in its nearly 95-year history.
* Adding to the gloom, the New York Times said insurer American International Group Inc (AIG.N: Quote, Profile, Research, Stock Buzz), working to stave off rating downgrades and shore up the capital of its holding company, has made an unprecedented approach to the Federal Reserve seeking $40 billion in short-term financing. AIG officials did not immediately respond to requests for comment. AIG shares traded in Frankfurt (AIG.F: Quote, Profile, Research, Stock Buzz) were down 33 percent.
* Also in the financial sector, Bank of America Corp (BAC.N: Quote, Profile, Research, Stock Buzz) agreed to buy Merrill Lynch (MER.N: Quote, Profile, Research, Stock Buzz) in an all-stock transaction worth $50 billion. Bank of America (BAC.F: Quote, Profile, Research, Stock Buzz) was down 12.5 percent in Frankfurt, while Merrill (MER.F: Quote, Profile, Research, Stock Buzz) was up nearly 40 percent.
* The news on Lehman knocked equity markets around the world, with the UK's FTSE 100 index .FTSE down 3.6 percent, Germany's DAX index .GDAXI down 3.4 percent, and France's CAC 40 .FCHI down 4.2 percent. A number of Asian markets, including Japan, Hong Kong, South Korea and China, were closed on Monday for a holiday.
* Companies releasing earnings on Monday include The Kroger Co (KR.N: Quote, Profile, Research, Stock Buzz) and Pall Corp (PLL.N: Quote, Profile, Research, Stock Buzz), while economic indicators include the New York Fed's manufacturing index for September, and the Fed's industrial output and capacity utilization data for August.
(Reporting by Blaise Robinson; Editing by Rory Channing)
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