Monday December 15, 09:56 PM
World stocks pressured by scandal, uncertainty
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NEW YORK (AFP) - Stock markets came under renewed pressure Monday as major global banks declared exposure to a multibillion-dollar Wall Street scandal and a plan to save the US car industry remained in limbo.
The financial sector worldwide was rattled by fallout from the scandal surrounding New York investment manager Bernard Madoff involving as much as 50 billion dollars.
Top banks in Europe and Asia revealed on Monday they could lose billions of dollars in a massive alleged pyramid investment fraud scam run by Madoff.
The Dow Jones Industrial Average fell 0.75 percent to end at 8,564.53.
The Nasdaq composite tumbled 2.10 percent to 1,508.34 and the broad Standard & Poor's 500 lost 1.27 percent to 868.57.
"The mood on the Street turned gloomier today. Reports showed that the manufacturing slump is worsening, and analysts announced that the shrinking economy will hurt earnings reports," said Colleen King of Schaeffer's Investment Research.
"Furthermore, the list of companies affected by Wall Street investment manager Bernard Madoff's alleged 50 billion dollar Ponzi scheme continues to grow."
Data showed US industrial production fell a hefty 0.6 percent in November "and the outlook is not good, especially with the vehicle makers indicating they will be slowing assembly rates," said Joel Naroff at Naroff Economic Advisors.
London' FTSE 100 index fell 0.07 to close at 4,277.56. In Paris the CAC 40 (Paris: news) was down 0.87 percent to 3,185.66, while the Frankfurt Dax lost 0.18 percent to close at 4,654.82.
Federal Reserve policymakers opened a two-day meeting Monday widely expected to take unprecedented action to cut key rates to near zero in the latest effort to battle a crippling credit crunch.
Yet analysts say low rates have so far failed to spark economic activity and that the central bank headed by Ben Bernanke will likely look at a range of exceptional actions to get credit flowing again.
"Investors continue to have lots of questions regarding the economy, which seems to impede their willingness to commit funds into a stock market that appears significantly undervalued," said Fred Dickson at US brokerage DA Davidson & Co.
"They are confused over the state of the credit crisis, wondering why the infusion of several trillion dollars in liquidity from the Fed hasn't noticeably helped jump start the economy.
"Investors are also confused regarding the long-term implications of the proposed auto rescue plan and as to why short-term interest rates have fallen to close to a zero yield."
In other markets, Brazil's Bovespa (news) slid 2.68 percent and the Toronto S&P/TSX lost 0.63 percent.
Asian stock prices had rebounded sharply earlier Monday, with Tokyo up 5.21 percent and Hong Kong 2.0 percent higher as markets mulled the latest developments on the troubled US auto sector.
US President George W. Bush said on the way from Iraq to Afghanistan that an agreement on how to remedy the carmakers' plight was not imminent, however.
"We're now in the process of working through with the stakeholders a way forward, and we're not quite ready to announce that yet," he told reporters aboard Air Force One.
He added that "this will not be a long process because of the economic -- the fragility of the autos."
The president's remarks came as lawmakers warned that time was running out for the auto giants, and traded blame with auto union chiefs over the collapse last week in the Senate of a short-term rescue bill.
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