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You are here: Home News European News World stocks fall after US auto bailout fails

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12/12/2008World stocks fall after US auto bailout fails

Stock markets throughout Europe and Asia fall Friday over concern of the failing US auto industry.

LONDON - Global stock markets fell on Friday as concern grew over a collapse of the big three US automakers after the US Senate refused to bail them out, traders said.

Share prices dropped in Asia and at the start of European trade after hours of late-night negotiations broke down among US senators on a bailout of the auto industry.

The dollar then fell sharply, hitting its lowest point against the yen since 1995.

"It's a very bad sign. US stocks will likely nosedive," said Yasutoshi Nagai, chief economist at Daiwa Securities SMBC. Wall Street will reopen at 1430 GMT after losing 2.24 percent on Thursday.

Tokyo's Nikkei index fell by more than seven percent at one point as the dollar dropped below the key JPY 90 (EUR 0.75) level for the first time since 1995.

In early European trade, London fell 4.07 percent, Frankfurt dropped 4.16 percent, Paris fell 4.74 percent, Madrid lost 3.93 percent and Zurich dropped 3.91 percent.

A USD 14 billion (EUR 10.5 billion) deal passed the House of Representatives earlier in December but was opposed by senators in US President George W Bush's Republican Party.

"I'm terribly disappointed that we are not able to arrive at a conclusion," said Senate Majority Leader Harry Reid, a member of president-elect Barack Obama's Democratic Party.

"We have tried very, very hard to arrive at a point where we could legislate for the automobile industry."

Japan was also reportedly set Friday to raise its own stimulus package to JPY 40 trillion from JPY 26.9 trillion as the outlook worsens in Asia's largest economy.

In New York on Thursday, the Dow Jones Industrial Average fell 2.24 percent as investors worried about the rescue plan for the US auto industry.

Their concern was reinforced by news that US unemployment reached 573,000, its highest point since 1972.

There was also disappointment that the trade deficit widened 1.1 percent in October to USD 57.2 billion, with both exports and imports down, suggesting demand is falling worldwide.

The sharp drop on Asian markets negated several days of gains. Japan's Nikkei index is now down 46.5 percent in 2008 while Hong Kong's Hang Seng is off almost 48 percent.

"Investors used the botched US auto bailout deal as an excuse to pocket the recent gains," Taiwan International Securities analyst Arch Shih said.

[AFP /Dow Jones Newswires / Expatica]


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