NEW YORK: Initial euphoria over China’s nearly $600 billion stimulus plans faded yesterday, leaving US stocks at the mercy of new signs of corporate distress which highlighted the economy’s weak state.
Stock markets in Asia and Europe rose after China on Sunday reported it had approved a government spending package and said it would adopt a “moderately easy” monetary policy.
However, investors soon sought safety, lifting the price of government debt and pushing US stocks mostly lower, as a further assessment of China’s plans and dismal corporate news led investors to think the bigger picture remains bearish.
The cost of rescuing American International Group Inc jumped to $150 billion after a smaller bailout failed to stabilize the ailing insurance giant, and shares of General Motors Corp. plunged to 62-year on analysts downgrades.
AIG reported a record $24.47 billion third-quarter loss, while Fannie Mae, the largest source of funding for US homes, reported a record $29 billion loss and said it is losing money so fast it may have to tap the government for additional cash to avoid shutting down.
In other dire news, electronics retailer Circuit City Stores Inc. filed for bankruptcy just weeks before the start of the key holiday shopping season, the largest US retailer to seek court protection from creditors since 2002.
The dollar fell against a basket of major currencies, with the US Dollar Index off 0.04 percent at 85.87.