The US Congress’s rejection of a bank rescue package wiped nearly 9 per cent off the S&P 500 on Monday but European shares and many Asian stock
The US Congress’s rejection of a bank rescue package wiped nearly 9 per cent off the S&P 500 on Monday but European shares and many Asian stock markets clawed back early losses on Tuesday amid hopes the US plan would eventually go through.
The US Senate will try to salvage the USD 700 billion financial-rescue package after the measure was defeated in the House of Representatives.
The lawmakers won’t have a lot of room to negotiate. “They’re not going to totally revamp the bill,” said Pete Davis, president of Davis Capital Investment Ideas in Washington. “They’ll make some minor changes and pass it. This is all about political cover.”
Concern over Europe’s financial sector is still deep. Following yesterday’s moves (see previous Hedgeweek article) by the governments of Belgium, France, the Netherlands, Luxembourg, UK and Germany to bailout a number of financial services groups, Ireland also offered to guarantee all bank deposits for two years to improve banks’ access to funds on international markets. It also guarantees covered bonds, senior debt and dated subordinated debt.
European stocks fell as much as 2 per cent in early trading and Japan’s Nikkei closed 4.12 per cent lower after the deep losses on Wall Street in the wake of Congress’s failure to agree a USD 700 billion (GDP 388 billion) plan to buy up toxic debt from the financial industry.
Globally, MSCI’s main world stock index, a benchmark for many leading investors, was down 0.8 per cent, adding to a 6.84 per cent loss on Monday that saw the index’s market capitalisation plunge USD 1.73 trillion.
