24 Sep 2008

Wall St lower due to concerns about bailout

8:50 am on 24 September 2008

Stocks in the United States fell on Tuesday on fears that congressional wrangling could delay a proposed $US700 billion plan to rescue the financial sector.

General Electric fell 4.6% to $US24.95 on the S&P 500 after Goldman Sachs cut the company's profit outlook. Downgrades also hurt the shares of Bank of America which fell by 2.5%, or 85 cents, to $US33.30.

The main focus was on the government's rescue plan, which involves mopping up bad mortgage debt from bank balance sheets in an effort to get them lending again.

Federal Reserve Chairman Ben Bernanke on Tuesday urged Congress to approve the plan quickly, warning a delay would put the economy at risk, but lawmakers want more details.

He told the Senate Banking Committee that "action by Congress is urgently required to stabilize the situation and avert what could otherwise be very serious consequences for our financial markets and our economy."

The Dow Jones industrial average was down 161.52 points, or 1.47%, at 10,854.17. Standard & Poor's 500 Index was down 18.87 points, or 1.56%, at 1,188.22. The Nasdaq Composite Index was down 25.64 points, or 1.18%, at 2,153.34.

About 1.15 billion shares changed hands on the New York Stock Exchange, below last year's estimated daily average of roughly 1.90 billion.

About 2.00 billion shares were traded on the Nasdaq, also below last year's daily average of 2.17 billion.

Other markets

European shares ended sharply lower for the second day. The pan-European FTSEurofirst 300 index ended 1.6% lower at 1,108.54 points, adding to a 2.1% loss on Monday after a record surge on Friday.

In Frankfurt, the DAX index ended at 6,068.53 points, down 39.22 or 0.64%.

In Paris, the CAC-40 index closed at 4,139.82 points, down 83.69 or 1.98%. The Swiss market index closed at 6,805.53 points, down 81.86 or 1.19%.

In Britain, the FTSE 100 closed 100.1 points lower at 5,136.1. The index lost 1.4% on Monday and is down 20.5% for the year.

Banks were among the main losers with Barclays, Royal Bank of Scotland, Lloyds TSB, HBOS and Standard Chartered losing between 2% - 13.8%.

Oil prices fell. Other commodities also tumbled, with copper down almost 4%. Gold was trading at $US885 an ounce.

US Federal Reserve Chairman Ben Bernanke told Congress that financial markets are under severe stress and urged immediate action to buy billions of dollars worth of tainted mortgage assets.

Treasury Secretary Henry Paulson also called on Congress not to weigh down the proposed bailout with unrelated provisions that would delay addressing key issues.

NZ & Australia

The NZX 50 index fell 28 points on Tuesday to close at 3228 on turnover of $118 million.

Telecom was down 2c to $2.80, while Contact Energy was down 10c to $2.60 after saying it will double directors' fees.

Fletcher Building was down 2c to $7.30, Sky Network Television was down 14c to $4.50 and Air New Zealand was down 5c to $1.03. The Warehouse finished down 1c to $3.14.

In the currency markets: at 8.20am on Wednesday, the New Zealand was trading at US68.29 cents, 81.74 Australian cents, 36.76 pence, 71.88 yen and 0.4644 euro. The Trade Weighted Index was at 63.75.

The Australian sharemarket closed down almost 2%.

The S&P/ASX200 index was down 97 points, or 1.93%, to 4923.5, while the All Ordinaries lost 92.4 points, or 1.83%, to 4957.7.

On the Sydney Futures Exchange, the December shares price index contract was 36 points lower at 4,995, on a volume of 32,016 contracts.