Preliminary talking points on the bailout plan (not to mention the confidence of the US president and senate party leaders) proved to be optimistic. Put up to a vote at the House of Representatives, the bill was soundly defeated. In response, the S&P 500 dropped 7.2 percent (though it rebonded a few percentage points within a matter of seconds on short covering) for the worst one-day decline since 1987. The MSCI World Market Index saw its biggest drop on record - 5.6 percent. Elsewhere, the dollar saw a near instantaenous 115 point drop against the euro, 100 points against the Japanese yen, 100 points against the franc, 150 points against the Canadian dollar. Commodities felt the shockwave as well. Gold is up $25, crude found the floor drop out underneath it by collapsing $10 and gas went limit down.
These massive moves are starting to be retraced, but after the short covering, the market will still be left with a very disappointing outlook for financial conditions and growth forecasts.
Bloomberg Professional Service
