World markets have fallen, despite the fact that a U.S. financial
rescue package cleared its first hurdle, passing by an overwhelming
margin in the U.S. Senate. From Washington, VOA's Michael Bowman reports.
World
markets might have been expected to breathe a sigh of relief after the
U.S. Senate approved a bill authorizing the federal government to
purchase hundreds of billions of dollars in bad debt from troubled
financial institutions. The measure is seen by many economists as an
important step toward ending an international credit crunch that could
strangle global economic growth.
But U.S. stocks opened down
and sank even lower by midday trading. The losses came amid another
indication of a slowing American economy: applications for unemployment
benefits have risen to their highest level in more than seven years.
At
the White House, President George Bush met with U.S. business leaders,
and said the bailout package must not stall in the House of
Representatives, which rejected a similar bill Monday, prompting the
biggest ever single-day point loss in U.S. market history.
"This
is an issue that is affecting hardworking people," he said. "They are
worried about their savings. They are worried about their jobs. They
are worried about their houses. They are worried about their small
businesses. And, the House of Representatives must listen to these
voices."
While Asian markets were mixed, all major European markets reversed early gains and finished with losses.
Europe's
market downturn came after the European Central Bank opted to keep
interest rates unchanged. ECB President Jean-Claude Trichet did not
rule out the possibility of future rate cuts to boost economic activity
and reassure financial markets, but said the bank was holding steady
for now to guard against inflation.
"The economic outlook is
subject to increased downside risks, mainly stemming from a scenario of
ongoing financial market tensions affecting the real economy more
adversely than currently foreseen," he said. "Other downside risks
relate to the possibility of renewed increases in highly volatile
energy and food prices, disorderly developments owing to global
imbalances, and rising protectionist pressures."
Meanwhile, the
International Monetary Fund is warning of a worldwide slowdown in
economic activity.
"It is now all too clear that we are seeing the most
dangerous shock to the mature financial markets since the 1930s, posing
a major threat to global growth," said IMF Deputy Research Director
Charles Collyns. "We find that when the banking system suffers major
damage, as in the current episode, the likelihood of a severe and
protracted downturn in activity increases."
The increasingly
global financial crisis began with a rash of U.S. home foreclosures
after a prolonged period of loose credit that saw millions of Americans
acquire home mortgages they could not afford. In recent months, most
major U.S. financial institutions that traded heavily in mortgage debt
have failed, been sold off, or were taken over by the U.S. government.
