Stock Markets Dive As Investor Anxiety Grows Over State Of Global Economy, U.S. Automakers and Oil Prices
As the global economy continues to slow down, investors are becoming more fearful. They not only have to worry about the state of the U.S. economy, which is frightening enough, but with the world increasingly becoming a closer knit global village, U.S. investors are having to look at the bigger picture – and it isn’t pretty. Authorities wrangling over how the much-touted $700 billion bailout plan is being administered, only serves to dent investor confidence even further. (See article: U.S. Stocks Slump As Treasury Bailout Plan Changes Direction)
A second day of congressional hearings with regard to the big three U.S. automakers – Ford, Chrysler and General Motors – ended without resolving coming to any concrete conclusions and investors remain on high alert hoping for a favorable resolution. The CEO’s of the automakers have come under fire for individually using private jets to fly to Washington to ask for taxpayer’s money. Although spokespersons for all three companies defended this action as standard procedure for top executives as it is considered to be a safer way to fly, some lawmakers are of the opinion that flying commercial would have sent the message that they are sincere about cutting costs and making sacrifices to keep the auto manufacturing industry going. While this may be a valid concern, it is not what is holding up the approval of assistance. The automakers are looking for $25 billion and there is dissension as to where the money should come from, or whether it should be granted at all. Taking a chunk out of the $700 billion bailout has been put forward as one option, and the money set aside by the Energy Department for the development of fuel-efficient transport being another. Another problem is that members of the House expect to leave Washington on Thursday afternoon, for the rest of the year, and House representatives are of the opinion that, while not being impossible, it is highly unlikely that the issues will be resolved by then.
Another factor affecting stock markets is the drop in oil price, with the price of U.S. crude due for December delivery falling by 77 cents to $53.62 a barrel on Wednesday. Much of the decline in prices can be attributed to the high inventory levels of crude and gasoline and, while this was largely anticipated, it confirms to investors that the demand for oil is declining.