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US, EU markets tumble: Bailout to 'take a while'

Oct 07, 2008 09:47 AM IST Business Business
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New Delhi: The mega $700-billion US bank bailout package, which the US Senate passed a week ago, has not proved to be a quick remedy as global investors had expected. US markets took a beating in the early trading hours on Monday with the benchmark Dow Industrial Average Index falling below the 10,000 level for the first time in four years, on fears of global economy hurtling into a recession. Dow Jones lost 800 points before recovering a little lost ground towards the end of trading. US President George W Bush on Monday said that it "will be a while" before there is stablisation in the financial system. "It's going to take a while to restore confidence in the financial system. But one thing people can be certain of is that the bill I signed is a big step toward solving this problem," Bush said. With the US administration ready to implement the landmark bailout deal, Bush said the strategy of the rescue package is to free up credit to get money moving. "I signed the bill last week. But it's going to take a while to get in place a program that, one, is effective, and, two, that doesn't waste taxpayers' money. We don't want to rush into this situation and not have the program be effective," Bush said. Bush promised to ensure that the unprecedented financial crisis was never repeated. "We'll make sure as time goes on this doesn't happen again. In the meantime, we've got to solve the problem. And that's why people sent me to Washington DC. When you see a problem, put a team together and solve it," Bush stressed. The dreadful numbers According to analysts, the lack of immediate impact of the US government's $700-bn bailout package, coupled with acute crunch in credit lines for the banks have pulled down the markets. PAGE_BREAK US stocks slid for a fourth straight day on Monday despite US government’s efforts to contain the fast-spreading financial crisis. The Wall Street also saw two other key indices S&P 500 Index and Nasdaq Composite Index fall nearly 5 per cent in the opening session. While the S&P's 500 Index was down by 3.9 per cent, extending the worst weekly slump since 2001, the Nasdaq Composite Index declined 4.94 per cent to 1,851.21 points. Wall Street's drop was part of a breakneck global sell-off, which led to trading being halted in Russia, Brazil and Peru. Asian markets take a beating The global crisis is also telling on the Asian markets. Japan's Nikkei stock average tumbled to a five-year low, shortly after the start of trade on Tuesday It slid below 10,000 for the first time since December 2003 on growing fears over the global economy and a sharply stronger yen. Other Asian markets are also expected to react negatively. Hong Kong's Hang Seng, though, is closed on account of a public holiday. CNN correspondent Andrew Stevens reports from Hong Kong,”Fall in the US economy and the European economy is indirectly affecting the Asian markets. It’s not about Asian banks suffering or facing a similar kind of exposure to sub-prime toxic debts, but it is more about the diminishing global growth.” “India being an engine of global economy in terms of the manufacturing sector, it’s difficult to see Asian markets turning around till something is done about the situation in US and Europe” he adds. Ripple effect European markets also saw a major selling spree. London's FTSE 100 was down 391 points — the biggest ever one-day point fall — with banking and commodity stocks taking a battering. Germany's DAX was also down 410 points to end trading at 5,387. Worried governments in Europe are scrambling to thwart the crisis. British Finance Minister Alistair Darling has announced plans for a bill giving Bank of England a statutory role to maintain financial stability. The European Union too has pledged to protect people's savings. CNN correspondent Richard Quest reports from London, “The shortfall on European markets has given policy makers on the continent a very nasty jolt. Not only did the $700-bn bailout in US failed to give confidence, now there are local and regional problems in Europe which are making things worst.” “The failure of a major German bank, which had to be bailed out and the decision by some European governments to guarantee the deposits of savers, it’s a patchwork quilt of policy decision. European Finance Minister will be getting together in Luxembourg hoping to try to come with a common response and put action behind words,” he adds. (With PTI and CNN inputs)