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Shockwaves from the global credit crisis have spread, hitting industry and jobs worldwide and putting pressure on the US Congress to finish up a $US700 billion bailout of the US financial sector.
Backers of the bailout on Thursday urged members of the House of Representatives who opposed a similar measure on Monday to change their vote. The Senate passed the bill Wednesday night and the House is expected to vote again on Friday.
Representative Steny Hoyer, the House Democratic leader, said there was a "good prospect" lawmakers would pass the bill. House Financial Services Committee Chairman Barney Frank said he thought the bill had the votes to pass, but can't be sure.
US economic data amplified warnings that a recession is approaching and European Central Bank President Jean-Claude Trichet said economic activity was also weakening in Europe, opening the door for the first interest rate cut in five years.
US factory orders fell 4% in August, the sharpest contraction in two years, which came on top of data on Wednesday that showed manufacturing activity in September at its weakest since the 2001 recession.
US jobless claims rose last week to their highest level in seven years, ahead of September payrolls data due out on Friday.
Oil prices fell more than $US4 a barrel on an expected slowdown in economic activity around the world. The dollar rose to a year high against the euro after Trichet's comments and major US stock indexes fell more than 2%.
At the Paris Auto Show, top automakers including General Motors Corp and Ford Motor Co warned of tough times, as evaporating credit for consumers cuts demand and could force production cuts and job losses.
"The problems of subprime and credit crunch are now all over the world," Ford Chief Executive Alan Mulally said. "The downturn is longer and deeper than we foresaw a year ago," he said.
Marriott International Inc urged Congress to pass the bill. "There are thousands, maybe tens of thousands of jobs at stake in our company alone, and we are typical," Chief Financial Officer Arne Sorenson said.
In a week marred by bank rescues across Europe, French President Nicolas Sarkozy's office said he would host the leaders of Britain, Italy, Germany and the ECB on Saturday to discuss a response to the credit crisis. Sarkozy denied reports a 300 billion euro ($US415 billion) plan akin to the US bailout was under consideration.
Fears about the health of banks continued to put upward pressure on interbank lending rates on Thursday, despite the Senate vote and large injections of cash by central banks.
The US commercial paper market also contracted for the third straight week, suffering its sharpest weekly decline in seven years, as business lending and borrowing effectively shut down.
Market participants remained cautious about the US bailout bill's prospects in the House.
"I'm not betting anything here because I don't know what the House is going to do," said Paul Mendelsohn, chief investment strategist at Windham Financial Services in Charlotte, Vermont. "If this bill doesn't pass in the House, it's game over."
Even if the bill is passed, worries remain over the global economic outlook, said Masamichi Adachi, senior economist at JPMorgan in Tokyo. "It's a completely different world now. All the things US authorities are doing now are simply aimed at preventing a global meltdown."
"Still uncertain"
The bailout plan, equivalent to some $US2,300 per American, is intended to reinvigorate credit markets and interbank lending that has frozen up while overleveraged financial institutions staggered under the weight of failed mortgages.
A group of House Republicans led opposition to the bill on Monday over criticism that it was helping a Wall Street guilty of taking reckless risks.
The Senate added income tax cuts and an increase in bank deposit insurance to make the bill more palatable to those who voted against it in the House on Monday, but some House Democrats said this put some of their support at risk. Monday's vote was 228-205, requiring a net gain of 12 votes for it to pass.
Under the deal, the Treasury would buy illiquid assets held by banks, in the hope of restoring confidence and unfreezing credit markets vital to the wider economy.
President George Bush, his authority eroded by the approaching end of his term in office, welcomed Senate passage of the package on Wednesday and urged the House to do the same, quickly.
"The bill that's before the Houses of Representatives tomorrow is a bill that has got the best chance of providing liquidity, providing credit, providing money so small businesses and medium-sized businesses can function," Bush said on Thursday.
The crisis has become the biggest issue in forthcoming US elections. Both presidential candidates, Republican Senator John McCain and Democratic Senator Barack Obama, voted for the package.
"This plan still isn't perfect. But it's what we must do to prevent a crisis from turning into a catastrophe," Obama said.
Switzerland's UBS AG, which has written off more than any other European bank this year because of exposure to US 'toxic' assets, offered some good news for investors, announcing it would make a small profit in the third quarter.
But Britain's Nationwide building society said house prices in August tumbled 12.4% from a year earlier, their biggest annual drop since records began in 1991, as higher interbank lending rates fed into a sharp increase in mortgage rates.
The tally for all the various rescue measures launched by US authorities this year runs to about $US1.8 trillion - more than the total economic output of both Canada and Spain last year.
