Markets in Europe have opened lower and are trending lower as well. Menus Cranny, Head of Sales at Cantor Index, said that European markets are certainly not looking positive at the moment. He said, "The fundamental problems prevail and that is lack of confidence combined with lack of inter-bank lending market."

Excerpts from CNBC-TV18's exclusive interview with Menus Cranny:

Q: What is the sense you are making of the market reacting at this point in time, the sentiment prevailing there? Is it really accumulative reaction to the Carlyle issue, to yen appreciation and global equity weakness?

A: I think it’s the combination of all those factors; most definitely the Carlyle story is incredibly important. Not only have they missed margin calls for some USD 400 million in the first three weeks of March, but we are now looking at the assets being seized, almost USD 16 billion worth of assets potentially being seized by creditors. If you add that into the maelstrom of the factors, the Federal Reserve has only delivered USD 200 billion worth of aid in a USD trillion issue. There are two big elephants in the room; recession and a lack of confidence in terms of inter-bank lending market. All of these factors are combined in.

Q: How much of a downside are you seeing more from the current levels?

A: We opened almost 100-110 points lower in the London market and it is certainly not looking incredibly positive at the moment. But having said that, the Fed and Global Central Bank participation in these markets came to the fore on Tuesday afternoon, so we are expecting a little bit of further draw down. The light of optimism that we saw yesterday or late on Tuesday/Wednesday has disappeared somewhat. The fundamental problems prevail and that is lack of confidence combined with lack of inter-bank lending or the confidence in inter-bank lending market.

Q: What's making this global slump?

A: This rout is something, which was perhaps a little bit unexpected since we saw the global central bank adding liquidity on Tuesday afternoon, but what we are looking at here is the unraveling of growth. There are big issues in the room. Recession? Are we in it? Are we passing through it? And indeed the debacle of confidence between the interbank lending markets. These are the issues.

On top of that we have a major fund in Amsterdam - the Carlyle Group - defaulting on almost USD 400 million worth of margin calls made from their lenders. The consequence of that has been that they have further defaulted another USD 16 billion worth of assets and the creditors are going to seize their assets. This has had ramifications all the way around.

What this is potentially triggering is system default and creating bigger margin calls on some of these substantial funds. But the big losers in London's FTSE are HSBC, Rio Tinto, BP (British Petroleum). Likewise on the Dax - Lehman, Allianz, and Daimler Chrysler are the losers. The Dax is down 20% from the start of the year. The FTSE in London is down 12% from the start of the year.

So these issues are coming home to roost. And the underlying concern is that there will be further unraveling within the hedge funds markets which may make the subprime crisis look like a walk in the park.