No U.S. bailout yet sends dollar, shares down
HONG KONG (Reuters) - Asian stocks and the U.S. dollar fell while Treasuries rose on Friday after talks over a $700 billion plan to save the financial system hit a snag and the biggest ever U.S. bank failure dashed hopes for a quick recovery.
Major European stock markets were expected to open down as much as 1.9 percent, according to financial bookmakers, and U.S. stock market futures pointed to a lower open on deep uncertainty about the fate of the White House rescue plan.
JPMorgan Chase & Co (JPM.N) bought certain Washington Mutual Inc WM.N assets for $1.9 billion after the largest U.S. savings and loan was closed overnight by a U.S. regulator.
The deal, the latest in the last few weeks that have shaken up the financial sector, showed how unstable the bank industry is and why stakes in agreement on the bailout plan are so high.
The U.S. dollar weakened against the yen and Swiss franc, two currencies associated with stability, as a bipartisan deal to get what is called the Troubled Assets Relief Program turned into a law may have to wait until at least the weekend.
"We'd have to pinpoint dollar weakness on the TARP plan and overnight there has been no progress on that. In fact it seems to be getting bogged down," said Jan Lambregts, head of Asia research with Rabobank Global Financial Markets in Hong Kong.
"The Congress doesn't really want the plan -- no one really wants the plan -- but the alternative is too bad to contemplate."
The dollar was down 0.7 percent against the yen at 105.65 yen and off 0.3 percent against the Swiss franc at 1.0860 francs.
The euro was up 0.1 percent to $1.4636, cutting earlier gains but still a little more than two cents away from a one-month high hit on Monday.
U.S. Treasury debt prices rose, with the most prominent gains in long-maturity bonds. The 10-year note rose 19/32 in prices, pushing down the yield to 3.79 percent from 3.84 percent late in New York.
The yield on the 3-month bill slipped 2 basis points to 0.75 percent as investors continued to pile into the very short-end of the market in search of liquidity and safety.
With commercial banks hoarding cash and reluctant to lend to each other, central banks have stepped in to fill the void. In a coordinated move to ease money market tension, the European Central Bank and the British and Swiss central banks said they would offer tens of billions of dollars for one week.
In South Korea, the Finance Ministry said it would inject $10 billion or more into the local swap market until the middle of October to stave off persistent dollar funding shortages.
STRESS IN ASIA MARKETS
Lending between banks remained sluggish and confidence low. Continued...
