US markets wary over rescue deal

United States shares have fallen in early trading with investors cautious over whether the House of Representatives will back the revised bank rescue plan.

Wall Street traders

Wall Street traders are stressed; on Wall Street, the Dow Jones index was down 89 points, or 0.8%, at 10,745.
Photo: AP

The House is due to discuss the scheme later, with a vote expected on Friday. The bill successfully passed through the US Senate on Wednesday.

On Wall Street, the Dow Jones index was down 89 points, or 0.8%, at 10,745.

In Europe, shares rose as France said it would host a summit on the global financial crisis on Saturday.

The UK’s FTSE 100 index was up 0.7%, while France’s Cac was 0.3% higher.

The office of French President Nicolas Sarkozy said the special meeting would discuss a co-ordinated response to the financial turmoil amongst European members of the G8 ahead of a meeting of world finance leaders in Washington next week.

UK Prime Minister Gordon Brown is due to attend, together with German Chancellor Angela Merkel, Italian Prime Minister Silvio Berlusconi and European Central Bank President Jean-Claude Trichet.

But with just two days to go before the talks start, EU members are deeply divided, the BBC’s Paris correspondent Emma-Jane Kirby said.

France and Holland favour a European response to help banks hit by the credit crisis while Germany and Luxembourg believe a joint rescue plan is not necessary.

European leaders have denied speculation that they wanted to establish a unified 300bn euro ($418.4bn; £236bn) banking rescue deal along the same lines as the US plan.

The rescue idea was said to be being proposed by France, but Mr Sarkozy insisted that there were no such plans.

“I deny both the amount and the principle [of such a plan],” he said.

In the US, a number of changes had to be made to the $700bn (£380bn) bail-out plan in order to help win approval in the Senate.

These include raising the government’s guarantee on savings from $100,000 to $250,000, tax breaks to help small businesses, expansion of child tax credit, and help for victims of recent hurricanes.

President George W Bush said that the package was “essential to the financial security of every American”.

However, economists said doubts remained about how effective the package would be.

“Investors are still concerned about the efficiency of this rescue plan and how it can help the global economy,” said Aric Au of Phillip Securities in Hong Kong.

Analysts said US shares were also hit on Thursday by a bigger than expected rise in weekly jobless figures.

US presidential hopefuls John McCain and Barack Obama, who both returned from the campaign trail for last night’s Senate debate, voted in favour of the rescue plan.

Senate majority leader Harry Reid, a Democrat, said he was happy with the result and praised both presidential candidates for voting.

“I think it shows that when we work together we can accomplish good things,” he said.

Mitch McConnell, leader of Republican senators, was also in jubilant mood.

“This was a measure that was much needed, to unfreeze the credit markets and get America’s economy working again,” he said.

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