Wall St suffers worst one-day fall in 21 years; Fed adds more cash to the markets; Two Koreas discuss single train route; Israel installs US missile defence to counter Iran; and more
Top of the Agenda: Bailout Failure Brings Mayhem
U.S. stock markets suffered their worst one-day fall since 1987, pulling global markets down in their wake as traders responded to the House of Representatives' rejection of a proposed $700 billion bailout package. The Dow Jones Industrial Average nose-dived just under 780 points, or nearly 7 percent (FT). Stock markets across Asia fell today in response, with Japanese and Australian equities showing particularly steep losses (AP). Across Europe, stocks plunged in morning trading today, though they rebounded modestly heading into the afternoon.
The bailout's failure leaves serious questions about the near-term prospects for credit markets. The New York Times reports a new scramble is underway to come up with a rescue package, with the U.S. Treasury and Federal Reserve forced to "dig deep into their toolkits." The Fed announced it would provide an extra $150 billion in emergency lending to banks, and make an additional $330 billion available for international currency swaps. Lawmakers on Capitol Hill, meanwhile, vowed to seek a compromise (WashPost) on a new rescue deal.
The Economist calls this the "land of the unknown" and says the failure of the initial deal pushes "already dysfunctional" credit markets "even closer to breaking point." The fear is that dried up credit could lead to cascading company failures, and not necessarily just in the financial sector. The landscape for U.S. banks has already been dramatically rewritten, as the Journal summarizes in a news analysis. NPR reports that European bankers, faced with their own set of potential collapses, are working to forge a rescue plan.
Pacific Rim: Korea Rail Talks
South Korean President Lee Myung-bak said he is willing to meet with North Korean officials to discuss a project to link the trans-Korean railway to Russia's trans-Siberian route, potentially expanding Korean business prospects (Korea Times).
- In an interview late last year, Tuck Business School's David Kang discussed the economic and strategic potential for such a project.
Japan: The Daily Yomiuri reports new Japanese Prime Minister Taro Aso took a confrontational stance toward the opposition DPJ party in his first policy speech before Japan's Diet.
Elsewhere
Israel plans missile radar system; first permanent U.S. troops to be based in Israel.
Pakistan military leadership shake-up; intelligence services chief replaced.
This is an excerpt of the CFR.org Daily News Brief. The full version is available on CFR.org.