LONDON World stocks and oil fell on Wednesday while government bonds and the yen gained as U.S. car makers begged for a bailout from Washington, adding to evidence that the credit crisis is hitting the real economy.
U.S. auto executives warned Congress on Tuesday that their industry was teetering on the brink of disaster as they pleaded for a $25 billion aid package.
The bailout proposal for General Motors, Ford Motor and Chrysler LLC failed to gain traction in the Senate due to doubts over whether the government should be spending yet more taxpayer money on corporate rescues.
"It's still precarious. The tone of the market is still dictated by the economy and recession," said Bernard McAlinden, investment strategist at NCB Stockbrokers in Dublin. The MSCI world equity index fell 0.6 percent while the FTSEurofirst 300 index of leading European shares dropped 1.3 percent.
U.S. stock futures were down 1.3 percent, pointing to a weaker open on Wall Street. Emerging stocks lost 1.6 percent.
U.S. crude oil fell 1 percent to $53.74 a barrel at one point, hitting its lowest in almost two years and falling more than $90 from its July record peak.
The yield on two-year U.S. Treasuries fell to a five-year low of 1.11 percent as investors sought safer government bonds. December bund futures rose 90 ticks to hit their highest level since March 2006 while Japanese government bonds also rose.
"Deleveraging is alive and well, leading to a come back in the risk-aversion bid, as investors sell out of riskier positions," Societe Generale said in a note to clients.
"Just about any news is an excuse to sell risk, as longer term dangers edge ever closer."
The yen rose to 96.66 per dollar as investors chased the low-yielding currency. The dollar was steady against a basket of major currencies.
(Additional reporting by Brian Gorman; Editing by Toby Chopra)