Published December 13, 2008

Detroit shock ripples through world markets

Dollar's overnight slump may further hit Japanese exporters such as Toyota and Sony

Email this article
Print article
Feedback

(London)

WORLD stock markets plunged yesterday as the US Senate's rejection of a US$14 billion deal to rescue Detroit's carmakers and further grim economic data stoked concerns that the recession in the world's largest economy will be longer and deeper than expected.

The FTSE 100 of leading British shares was down 169.74 points, or 3.9 per cent, at 4,218.95, while Germany's DAX fell 230.35 points, or 4.8 per cent, to 4,536.85. The CAC-40 in France fell 181.02 points, or 5.5 per cent, to 3,125.11.

Earlier, Asian markets tumbled, with Japan's Nikkei 225 stock average down 484.68 points, or 5.6 per cent, to 8,235.87. Hong Kong's Hang Seng index slid 5.5 per cent to 14,758.39.

US stock index futures pointed to a big sell-off later on Wall Street. The Dow Jones Industrial Average was projected to drop 278 points, or 3.2 per cent, to 8,292, while the broader Standard & Poor's 500 index was forecast to fall 33.80 points, or 3.9 per cent, to 840.70.



Investors were rattled after the bailout for Detroit's struggling Big Three carmakers failed in the Senate. The collapse came after bipartisan talks on the car rescue broke down over Republican demands that the United Auto Workers union agree to steep wage cuts by 2009 to bring their pay into line with US plants of Japanese carmakers.

The bankruptcy of any of the big US carmakers would deal another blow to the world's largest economy, which is sliding deeper and deeper into recession.

It's not just stock markets suffering in the wake of the failure of the Senate to pass the car rescue deal. The dollar slumped overnight too, particularly against the yen.

That heaps more bad news on major Japanese exporters such as Toyota and Sony - already reeling from waning global consumer demand - whose overseas income is eroded by an appreciating yen. -- AP