Published December 13, 2008
Detroit shock ripples through world markets
Dollar's overnight slump may further hit Japanese exporters such as Toyota and Sony
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(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
Sunday, 14 December 2008
Published December 13, 2008
Yen hits 13-year high as risk aversion returns
Failure of US carmaker rescue plan sends investors running for safe havens
By LARRY WEE
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NEWS that US lawmakers had failed to pass a US$14 billion rescue package for US carmakers hit Asia with a sledgehammer yesterday, lifting the safe refuge yen to fresh 13-year peaks of S$1.6899 per 100 yen and 88.4 yen per US dollar, while forcing Asian stocks sharply lower.
What may have made the currency moves 'extra-large', traders explained, was that the news hit the street during thinned out lunch-time trading hours in Asia yesterday, and this certainly was a factor in pressing the yield on safe refuge US Treasury issued to fresh lows as well. The yield on benchmark 10-year US Treasuries, for example, tumbled to yet another record low of 2.48 per cent before recovering above 2.5 per cent by the close.
And risk aversion jumped as the region's benchmark stock indices tumbled as much as 6-7 per cent in the wake of news that Republican senators had voted out the compromise rescue deal crafted for US lawmakers after Thursday's stock market close in the US.
In line with what has become a familiar pattern more recently on the currency front, the flight for safety caused the US dollar and yen to surge sharply against most of their weaker counterparts - though between them, the greenback tumbled against the yen.
The Australian dollar and South Korean won suffered some of their worst relapses versus the US dollar yesterday, while the UK pound and New Zealand dollar were dragged down to fresh multi-year lows versus a sharply higher yen - at 132.66 yen and 48.22 yen respectively - before recovering some poise by the Asian close.
Before that, however, news of the US car rescue failure was bad enough to wipe out all of the gains versus the yen that the pound, Australian dollar and its New Zealand counterpart had painstakingly clawed back between Monday and Thursday this week.
By the close of Asian trading yesterday, the trio were between 2.5 and 3.5 per cent weaker from Thursday in yen terms - at 134.29 yen, 58.98 yen and 49.27 yen respectively.
Locally, the return of risk aversion saw the US dollar back spike more than one Singapore cent above the fresh one-month low of S$1.4780 that it recorded in early Asian trading yesterday morning, to end the day about unchanged from Thursday, at S$1.4932.
On the other hand, the return of risk aversion sentiment saw the Australian dollar nosedive more than three Singapore cents in Asian trading, from a morning high of just above one Singapore dollar to an afternoon low of just below 97 Singapore cents, before ending the day one per cent worse off at 97.52 cents. The yen also trimmed some of its biggest intra-day gains, but still finished the session 2.2 per cent higher each at S$1.6534 per 100 yen and 90.31 yen per US dollar.
Yen hits 13-year high as risk aversion returns
Failure of US carmaker rescue plan sends investors running for safe havens
By LARRY WEE
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NEWS that US lawmakers had failed to pass a US$14 billion rescue package for US carmakers hit Asia with a sledgehammer yesterday, lifting the safe refuge yen to fresh 13-year peaks of S$1.6899 per 100 yen and 88.4 yen per US dollar, while forcing Asian stocks sharply lower.
What may have made the currency moves 'extra-large', traders explained, was that the news hit the street during thinned out lunch-time trading hours in Asia yesterday, and this certainly was a factor in pressing the yield on safe refuge US Treasury issued to fresh lows as well. The yield on benchmark 10-year US Treasuries, for example, tumbled to yet another record low of 2.48 per cent before recovering above 2.5 per cent by the close.
And risk aversion jumped as the region's benchmark stock indices tumbled as much as 6-7 per cent in the wake of news that Republican senators had voted out the compromise rescue deal crafted for US lawmakers after Thursday's stock market close in the US.
In line with what has become a familiar pattern more recently on the currency front, the flight for safety caused the US dollar and yen to surge sharply against most of their weaker counterparts - though between them, the greenback tumbled against the yen.
The Australian dollar and South Korean won suffered some of their worst relapses versus the US dollar yesterday, while the UK pound and New Zealand dollar were dragged down to fresh multi-year lows versus a sharply higher yen - at 132.66 yen and 48.22 yen respectively - before recovering some poise by the Asian close.
Before that, however, news of the US car rescue failure was bad enough to wipe out all of the gains versus the yen that the pound, Australian dollar and its New Zealand counterpart had painstakingly clawed back between Monday and Thursday this week.
By the close of Asian trading yesterday, the trio were between 2.5 and 3.5 per cent weaker from Thursday in yen terms - at 134.29 yen, 58.98 yen and 49.27 yen respectively.
Locally, the return of risk aversion saw the US dollar back spike more than one Singapore cent above the fresh one-month low of S$1.4780 that it recorded in early Asian trading yesterday morning, to end the day about unchanged from Thursday, at S$1.4932.
On the other hand, the return of risk aversion sentiment saw the Australian dollar nosedive more than three Singapore cents in Asian trading, from a morning high of just above one Singapore dollar to an afternoon low of just below 97 Singapore cents, before ending the day one per cent worse off at 97.52 cents. The yen also trimmed some of its biggest intra-day gains, but still finished the session 2.2 per cent higher each at S$1.6534 per 100 yen and 90.31 yen per US dollar.
Published December 13, 2008
Car wreck
US auto bailout fails as unions dig in - but White House hints at money from US$700b fund
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(Washington)
SAVING BIG 3
A pastor prays for the future of the US car industry during a special service in Detroit
IN a shocking development, the Senate has killed a US$14 billion package to help struggling US carmakers after a partisan dispute over union wage cuts derailed last-ditch attempts at a rescue before year's end.
The failure to reach agreement on Capitol Hill on Thursday night raised the spectre of financial collapse for General Motors and Chrysler, which some experts say may not be able to survive until the end of the year.
But as the gloom deepens, the White House said yesterday that it would consider tapping a US$700 billion financial rescue fund to prevent a collapse of the troubled carmakers. 'Given the current weakened state of the US economy, we will consider other options if necessary - including use of the Tarp programme,' said White House spokeswoman Dana Perino, referring to the Troubled Asset Relief Program initially geared to help financial services firms.
After Senate Republicans baulked at supporting the US$14 billion car rescue plan approved by the House on Wednesday, negotiators worked late into Thursday evening to broker a compromise but they deadlocked over Republican demands for steep cuts in pay and benefits by the United Automobile Workers union in 2009.
The failure in Congress to provide a financial lifeline for General Motors and Chrysler was a bruising defeat for President George W Bush in the waning weeks of his term, and also for President-elect Barack Obama, who earlier on Thursday urged Congress to act to avoid a further loss of jobs in an already deeply debilitated economy.
'It's over with,' Senate Majority Leader Harry Reid said on the Senate floor, after it was clear that a deal could not be reached. 'I dread looking at Wall Street tomorrow. It's not going to be a pleasant sight.' Mr Reid added: 'This is going to be a very, very bad Christmas for a lot of people as a result of what takes place here tonight.'
Wall Street opened lower with the Dow Jones Industrial Average falling 2.4 per cent to 8,365.25 while the S&P 500 was off 2.3 per cent to 853.95 and the Nasdaq slid 1.8 per cent to 1,480.15.
The Republican leader, Senator Mitch McConnell, said: 'We have had before us this whole question of the viability of the American automobile manufacturers. None of us want to see them go down, but very few of us had anything to do with the dilemma that they have created for themselves.'
Moments later, the Senate failed to win the 60 votes needed to bring up the car rescue plan for consideration. The Senate voted 52-35.
The White House said it would consider alternatives but offered no assurances. While some hoped it would dip into the Treasury's US$700 billion financial system stabilisation fund to rescue the car industry, a Treasury spokeswoman said the fund was best used in trying to stabilise the nation's troubled financial sector and this was unlikely to change.
But Mr McConnell also held out slim hope for a compromise suggesting that Republicans could rally around a set of proposals by Senator Bob Corker.
Under his plan, the carmakers would have been required by March 31 to slash their debt obligations by two-thirds - an enormous sum given that General Motors alone has more than US$60 billion in outstanding debt.
The carmakers would also have been required to cut wages and benefits to match the average hourly wage and benefits of Nissan, Toyota and Honda employees based in the United States, and the companies would have to impose equivalent work rules.
It was over this proposal that the talks ultimately deadlocked. General Motors, Chrysler and industry experts have said that the two companies would likely not survive until the end of this month without government aid.
Several Republicans also blamed the autoworkers union.
'It sounds like the UAW blew it up,' said Republican Senatro David Vitter.
Senatro Richard Shelby, the senior Republican on the banking committee and a leading critic of the auto bailout proposal, said: 'We're hoping that the Democrats will continue to negotiate, but I think we have reached a point that labour has got to give. If they want a bill they can get one.' -- NYT
Car wreck
US auto bailout fails as unions dig in - but White House hints at money from US$700b fund
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Print article
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(Washington)
SAVING BIG 3
A pastor prays for the future of the US car industry during a special service in Detroit
IN a shocking development, the Senate has killed a US$14 billion package to help struggling US carmakers after a partisan dispute over union wage cuts derailed last-ditch attempts at a rescue before year's end.
The failure to reach agreement on Capitol Hill on Thursday night raised the spectre of financial collapse for General Motors and Chrysler, which some experts say may not be able to survive until the end of the year.
But as the gloom deepens, the White House said yesterday that it would consider tapping a US$700 billion financial rescue fund to prevent a collapse of the troubled carmakers. 'Given the current weakened state of the US economy, we will consider other options if necessary - including use of the Tarp programme,' said White House spokeswoman Dana Perino, referring to the Troubled Asset Relief Program initially geared to help financial services firms.
After Senate Republicans baulked at supporting the US$14 billion car rescue plan approved by the House on Wednesday, negotiators worked late into Thursday evening to broker a compromise but they deadlocked over Republican demands for steep cuts in pay and benefits by the United Automobile Workers union in 2009.
The failure in Congress to provide a financial lifeline for General Motors and Chrysler was a bruising defeat for President George W Bush in the waning weeks of his term, and also for President-elect Barack Obama, who earlier on Thursday urged Congress to act to avoid a further loss of jobs in an already deeply debilitated economy.
'It's over with,' Senate Majority Leader Harry Reid said on the Senate floor, after it was clear that a deal could not be reached. 'I dread looking at Wall Street tomorrow. It's not going to be a pleasant sight.' Mr Reid added: 'This is going to be a very, very bad Christmas for a lot of people as a result of what takes place here tonight.'
Wall Street opened lower with the Dow Jones Industrial Average falling 2.4 per cent to 8,365.25 while the S&P 500 was off 2.3 per cent to 853.95 and the Nasdaq slid 1.8 per cent to 1,480.15.
The Republican leader, Senator Mitch McConnell, said: 'We have had before us this whole question of the viability of the American automobile manufacturers. None of us want to see them go down, but very few of us had anything to do with the dilemma that they have created for themselves.'
Moments later, the Senate failed to win the 60 votes needed to bring up the car rescue plan for consideration. The Senate voted 52-35.
The White House said it would consider alternatives but offered no assurances. While some hoped it would dip into the Treasury's US$700 billion financial system stabilisation fund to rescue the car industry, a Treasury spokeswoman said the fund was best used in trying to stabilise the nation's troubled financial sector and this was unlikely to change.
But Mr McConnell also held out slim hope for a compromise suggesting that Republicans could rally around a set of proposals by Senator Bob Corker.
Under his plan, the carmakers would have been required by March 31 to slash their debt obligations by two-thirds - an enormous sum given that General Motors alone has more than US$60 billion in outstanding debt.
The carmakers would also have been required to cut wages and benefits to match the average hourly wage and benefits of Nissan, Toyota and Honda employees based in the United States, and the companies would have to impose equivalent work rules.
It was over this proposal that the talks ultimately deadlocked. General Motors, Chrysler and industry experts have said that the two companies would likely not survive until the end of this month without government aid.
Several Republicans also blamed the autoworkers union.
'It sounds like the UAW blew it up,' said Republican Senatro David Vitter.
Senatro Richard Shelby, the senior Republican on the banking committee and a leading critic of the auto bailout proposal, said: 'We're hoping that the Democrats will continue to negotiate, but I think we have reached a point that labour has got to give. If they want a bill they can get one.' -- NYT
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