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Asian markets down as US bailout stalls

Stocks were mostly down across Asia Friday as political wrangling held up a 700-billion-dollar bailout package for the US financial system despite earlier hopes that a deal was near.

business Updated: Sep 26, 2008 10:39 IST

Stocks were mostly down across Asia Friday as political wrangling held up a 700-billion-dollar bailout package for the US financial system despite earlier hopes that a deal was near.

Talks over the rescue package were gridlocked Thursday as lawmakers were at loggerheads over the way forward, with Democrats accusing the Republicans of dragging their feet.

Tokyo's Nikkei was down 0.19 percent at noon, Hong Kong was off 2.25 percent, Seoul was 1.29 percent down and Taipei lost 1.74 percent. Singapore eased 0.44 percent.

Some stocks had risen earlier, taking a cue from Wall Street, which closed 1.82 percent up on prospects that an agreement could be reached.

US Democrats said Republican White House contender John McCain had sabotaged the rescue package, which they said had largely been agreed upon.

"John McCain did nothing to help, he only hurt the process," Senate Majority Leader Harry Reid told a joint news conference with Senate banking committee chairman Christopher Dodd.

Under the proposal the government would buy 700 billion dollars of toxic mortgage-related assets at the heart of the global credit crisis. The move would be the biggest government bailout since the 1930s Great Depression.

Shortly before the talks, senior lawmakers announced the outlines of a deal but some Republicans dragged their feet, while Democrats called for limits on pay deals for executives whose companies are rescued.

The talks were set to reconvene Friday.

Earlier, as President George W. Bush met McCain and his Democratic rival Barack Obama, he said: "We are in a serious economic crisis in the country, if we don't pass a piece of legislation."

In Tokyo dealers were also bearish as the government announced inflation had remained at a decade high 2.4 percent, with analysts warning it may not come down soon.

"Rising grocery prices are particularly negative for consumer demand, and this trend of high prices is likely to last for some time, which could weigh on the economy," said Norio Miyagawa, an economist at Shinko Research Institute.

The hold-up sent oil prices down, with New York's main contract, light sweet crude for November delivery, easing 1.30 dollars to 106.72 dollars a barrel.

The contract climbed 2.29 dollars to 108.02 at the close of floor trading on Thursday at the New York Mercantile Exchange as a deal looked imminent.

"It seems like people who are watching the oil market are worried there could be some blockade" over the deal, said Dave Ernsberger, Asia director of global energy information provider Platts. The package is necessary if oil prices are to regain their upward momentum, he added.

Global markets have been sent into a tailspin since the collapse last week of Wall Street investment giant Lehman Brothers and the US government's rescue of insurance giant AIG.

The crisis took another scalp Thursday as the US government closed struggling Washington Mutual, one of the country's largest savings and loans banks, allowing JPMorgan Chase to buy its operations for 1.9 billion dollars.

It has also led to global banking giant HSBC cutting 1,100 staff worldwide.

Meanwhile it emerged Friday Nomura Holdings will pay just a token two dollars for the Europe and Middle East operations of bankrupt Wall Street giant Lehman Brothers.

The top Japanese broker will acquire only Lehman's employees in the regions, and not its stocks, bonds or other assets, the Nikkei business daily reported.