3% fall in US stocks over downbeat data

US STOCKS lost as much as 3 per cent of their value early yesterday as investors took account of downbeat data which pointed to difficult business conditions, and fears that the government's $700 billion (€507 billion) bailout for the financial system might not relieve pressure on the economy.

With investors apprehensive about a House of Representatives vote expected today on the revised bailout, president George W Bush urged House members to set aside their opposition to the measure.

There was no relief for share values following a strong vote in favour of the measure overnight in the Senate as investors concentrated on the economic outlook.

While money market stress eased in Europe, lending rates for overnight loans among banks remained above central bank targets. This reflects a strong reluctance to take on counterparty risk and indicates costlier lending.

The US commercial paper market contracted dramatically for a third successive week as business lending and borrowing effectively shut down, according to new data from the Federal Reserve.

The overnight rate for the London interbank offered rate (Libor) in dollars fell more than a full point to 2.68125 per cent, while euro overnight rates also eased. However, longer maturity rates jumped.

The price of crude oil approached $94 per barrel, dropping more than $4 on fears of weaker demand.

New economic data showed that the number of people filing for new jobless benefit claims had risen to a seven-year high, while a drop in factory orders in August was steeper than expected.

"The data have been pretty uniformly downbeat and I think there's enough damage that's been done to financial conditions of late to suggest that we're not going to see an end to that weakness, certainly not in the near-term horizon," Citigroup economist Robert DiClemente told The Irish Times.