Alexa
  • Directory of Taiwan

Europe flat on skepticism over US bank plan

Europe flat on skepticism over US bank plan

European stock markets traded flat Wednesday despite a modest rebound on Wall Street as investors reacted with skepticism to the U.S. government's latest plan to rescue the ailing financial industry with as much as $2 trillion in funding.
By late afternoon in mainland Europe, Britain's FTSE 100 was down 0.03 percent at 4,201.29 and Germany's DAX slipped 0.4 percent to 4,489.24. But France's CAC 40 was 0.01 percent higher at 3,021.18.
U.S. indexes opened higher after falling more than 4 percent on Tuesday on disappointment over lack of detail in the government's financial rescue. In morning trading in New York, the Dow Jones industrial average was up 0.4 percent at 7,920.82, the Standard & Poor's 500 index rose 0.4 percent to 830.77, and the Nasdaq composite index jumped by 0.3 percent to 1,528.99.
Across Europe, bank stocks dragged down market indexes. Early on, Credit Suisse dropped as much as 8.3 percent after Switzerland's second biggest bank reported a fourth-quarter net loss of 6 billion Swiss francs ($5.61 billion), much worse than markets were expecting, as both asset management and investment banking lost money amid the financial turmoil. But it later recovered its losses to trade 2 percent up.
Nearly ever major market in Asia retreated, further hurt by new figures showing China's exports plunged 17.5 percent in January _ the sharpest drop in more than a decade.
As in the U.S. the day before, investors across Asia and Europe questioned whether the revamped bailout program, unveiled Tuesday by Treasury Secretary Timothy Geithner, would be enough to absorb the bad assets saddling bank balance sheets and free up frozen credit markets for consumers and businesses.
"It's fair to say that the latest version of the bailout plan in the U.S. was greeted with some disappointment, simply because there was a complete lack of detail which was what investors were hoping for," said Richard Hunter, head of UK equities at Hargreaves Lansdown Stockbrokers in London. "Certainly in drawing a line once and for all over toxic assets, the markets will be waiting for further detail from the U.S. authorities."
He added that disappointed investors had been "going back to more risk averse instruments, such as U.S. Treasuries and gold."
A centerpiece of the U.S. plan involves the government teaming with the private sector to buy up to $1 trillion in souring assets from financial firms. A separate lending program would be expanded to as much as $1 trillion from $200 billion for consumers and businesses.
But officials were short on specifics about how exactly the public-private partnership might work, analysts said.
Garry Evans, a chief Asian equity strategist with HSBC in Hong Kong, called the plan "muddled." He said the government was skirting around what many investors have already concluded: that the U.S. may have to nationalize the banks for a period.
"They have still philosophically backed away from the ultimate conclusion, which is the government will have to take over financial institutions," he said. "Philosophically that's quite hard for the U.S. government to admit, but the history of banking crises shows that is what governments usually do."
Not even the colossal amounts of money announced in the U.S. are likely to make up the funding shortfall created by the risky mortgage securities and other distressed assets banks are holding, said Paul Schulte, a chief Asia equity strategist at Nomura International in Hong Kong.
The financial hole could be as big as $4 trillion, but U.S. officials have yet to fully explain the scope of the problem, he said.
"The problem is much larger than people thought and the solutions to this much larger problem are still not coherent," Schulte said. "The plan is absolutely a step in the right direction, but we have like 45 more steps to go."
While recouping some of their losses, most Asian markets closed down. In Hong Kong, the Hang Seng tumbled 341.43 points, or 2.5 percent, to 13,539.21, while South Korea's Kospi lost 8.69, or 0.7 percent, to 1,190.18. Japanese markets were closed for a public holiday.
Elsewhere, benchmarks in Australia and India fell 0.4 percent and 0.5 percent.
In mainland China, Shanghai's main stock measure sank about 0.2 percent in a choppy session after news of last month's fall in exports, the third straight month of declines.
The collapse in global demand for Chinese textiles, toys and other goods are devastating export-dependent coastal areas. The figures add to the threat of more job losses and increase pressure on Beijing to boost slumping economic growth.
On Tuesday, the Dow industrials fell 381.99, or 4.62 percent, to 7,888.88. Broader stock indicators also tumbled, with the Standard & Poor's 500 index down 42.73, or 4.91 percent, to 827.16. It was the biggest drop for the index since the Obama inauguration on Jan. 20.
In oil, light sweet crude for March delivery rose 47 cents to $38.02 a barrel in European trade. The contract fell $2.01 to settle at $37.55 overnight.
__
AP business writer Jeremiah Marquez in Hong Kong contributed to this report.