NEW YORK: The US government’s proposed $700 billion bailout of Wall Street dominated markets yesterday, with the dollar rising on optimism the plan would aid the economy but global stocks falling on uncertainty over its fate.
US and euro-zone government bond prices rose and inter-bank lending rates stayed far above central bank target levels as investors worried about the viability of a plan that lawmakers must approve and that will be paid for by taxpayers.
Oil prices fell $5 yesterday — reversing direction after Monday’s dramatic rally — as dealers focused on slowing global energy demand and doubts over a US plan to rescue the financial sector.
US crude for November dropped $5.00 to $104.37 a barrel by 1703 GMT, after rising nearly $7 on Monday. November Brent crude traded down $5.05 at $100.99. As investors focused on congressional testimony by US Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke, tightness in credit market was very much alive. A closely watched gauge showed banks are still reluctant to make loans to each other. US stocks fell, as lower commodity prices dragged down natural resources companies, reversing earlier gains on hopes the proposed bailout would help loosen up credit markets, while boosting business and consumer spending.
Investors were cautious and trading was choppy a day after Wall Street’s slide wiped out gains from Friday that were driven by initial enthusiasm over the rescue plan.
Before 1 p.m., the Dow Jones Industrial Average was down 29.39 points, or 0.27 percent, at 10,986.30. The Standard & Poor’s 500 Index was down 4.99 points, or 0.41 percent, at 1,202.10. The Nasdaq Composite Index was down 4.56 points, or 0.21 percent, at 2,174.42.
European shares ended sharply lower for the second straight as investors fretted over the bailout. The pan-European FTSEurofirst 300 index closed 1.64 percent lower at 1,108.54 points.
The dollar climbed from a record one-day loss versus the euro, with investors encouraged by the fall in oil prices and Wall Street’s steady performance.
The euro rose 0.56 percent at $1.4701. Against major currencies, the dollar gained, with the US Dollar Index up 0.41 percent at 76.585. Against the yen, the dollar fell 0.37 percent at 105.80.
Trading was thin as many investors waited until the market turmoil to subside. Bond gains were curbed by concerns over how much such a bailout would cost.
The benchmark 10-year US Treasury note rose 7/32 to yield 3.83 percent. The 30-year US Treasury bond rose 2Ø32 to yield 4.42. percent. US light sweet crude oil fell $3.28 to $106.09 a barrel.
Spot gold prices fell $12.80 to $887.40 an ounce. Overnight in Asia, stocks fell and US Treasury prices rose on skepticism about Washington’s billion bailout plan.
The MSCI index of Asia-Pacific stocks outside of Japan slipped 2.2 percent. Japan’s market was closed because of a holiday.
