World markets mixed after Senate OKs bailout plan

[October 02, 2008]  LONDON (AP) -- World stock markets were mixed Thursday as broader concerns about a global slowdown dampened relief over the U.S. Senate's passage of the $700 billion bank rescue package.

By afternoon in Europe, Britain's FTSE 100 climbed 1.34 percent to 5,026.11, Germany's DAX rose 0.62 percent to 5,842.31, and France's CAC 40 added 1.03 percent to 4,096.37.

In Asia, Japan's Nikkei 225 average fell 1.9 percent to 11,154.76 and benchmarks in Australia, South Korea and Taiwan also dropped.

"The markets are reluctant to take as a completely done deal that (the bailout plan) will go through but there is a growing feeling that it will because it was decisively approved by the U.S. Senate," said Andrew Bell, head of research at Rensburg Sheppards, an investment management company in Britain.

"Global banks are injecting lots of liquidity which is oiling the creaking engine, and there is an optimistic view that central banks are willing to cut rates in the coming weeks," he said. But there has been a "big loss of economic momentum in the last few months," he added.

Swiss bank UBS cheered investors by announcing it expects "a small profit" in the third quarter, raising hopes that a dismal year of U.S. sub-prime related losses -- to the tune of some 45 billion Swiss francs ($40 billion) -- may soon be over.

Switzerland's largest bank also said it has further reduced its exposure to the subprime-related investments that caused it to make massive writedowns, starting a year ago.

Shares in UBS, which has been one of the European banks hardest hit by the U.S. property market meltdown, rose by 10.36 percent in Zurich trading.

The European Central Bank was also meeting amid calls for an interest rate cut in the face of the growing financial crisis, but analysts said the bank likely would hold its benchmark interest rate steady for the 15-nation euro zone as inflation outweighs worries about the meltdown.

Also Thursday, France announced it will host a European financial summit Saturday in Paris, and European central banks made yet more dollars available to money markets, offering up another $60 billion in overnight funds to keep the financial system flush with cash.

In Asia, the mood on the markets seemed to improve as the day progressed. Hong Kong's market, down for much of the day, managed a late-day rally, lifted by gains in insurer Ping An and expectations that China will introduce supportive market measures. The Hang Seng index rose 1.1 percent to 18,211.11.

Asian investors gave a tepid reaction to the Senate's approval Wednesday to a revised bailout plan aimed at stabilizing the U.S. financial system. The House of Representatives, which rejected an earlier version of the bill, will likely vote on the bill Friday.

Even if the package is approved, traders are skeptical about its ultimate impact on a faltering global economy. Cleaning up the pile of bad debts on banks' balance sheets will be a long, arduous process, and the crisis is spreading in Europe, where governments have bailed out two troubled banks, Fortis NV and Dexia.

"Investors are still concerned about the efficiency of this rescue plan and how it can help the global economy," said Aric Au, marketing manager for institutional sales at Phillip Securities in Hong Kong. "But at this moment, nobody is sure about this. They need to have more information about the finalized plan."

If the plan is rejected again by the House, "it will be a big problem" said Tsuyoshi Nomaguchi, a strategist at Daiwa Securities in Tokyo. "But even if it passes, the focus will be on the economy."

Bleak data released overnight in the U.S. added to fears for the world's largest economy. Auto sales plummeted, and a key measure of U.S. manufacturing activity hit its lowest level since the aftermath of the Sept. 11, 2001, terrorist attacks.

U.S. auto sales dropped below 1 million last month for the first time in more than 15 years as some consumers struggled to get financing and others were frightened away from showrooms by bank failures and turmoil on Wall Street.

Shares of Toyota Motor Corp. tumbled 3.4 percent after sales in the U.S. last month dropped 32 percent.

"Toyota is not immune to the economic cycle that is affecting the entire industry in the United States," said Toyota spokesman Paul Nolasco.

Honda Motor Co. shed 4.5 percent after saying its U.S. sales fell 24 percent in September. Nissan Motor Co., whose U.S. sales plummeted 37 percent, declined 4.0 percent.

In Seoul, shares of top Korean automaker Hyundai Motor Co. slipped almost 1 percent. The company said Wednesday that it sold 25 percent fewer cars in the U.S. in September than a year earlier.

Insurer Ping An's stock soared on news announced late Tuesday that it would not complete its proposed purchase of half of Belgian-Dutch bank Fortis NV's asset management arm for euro2.15 billion ($2.99 billion). Because of Wednesday's market holiday in Hong Kong, it was the first chance for investors to react to the news.

U.S. stock futures were down slightly, suggesting Wall Street would open lower or mixed. On Wednesday, the Dow Jones industrial average dipped 0.2 percent to 10,831.07.

Markets in China, India, Malaysia and Indonesia were closed due to national holidays.

[Associated Press; By LOUISE WATT]

AP writer Tomoko A. Hosaka contributed to this report from Tokyo.

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