Equity Markets Hit Again By Consumers Weakness

Asian trade: Equity markets are trading in the red again, after the U.S. Treasury plans to spend half of the bailout amount on consumer credit. Markets were also sent lower after two major companies announced lower earnings forecast.

Mr. Paulson said yesterday that the remaining $350 billion left in the bailout plan would be used on consumer credit lines, because this is the next thing that post significant risks for the economy. The initial $700 billion were planned to be used to buy illiquid assets from bank’s balance sheets, but now it seems those assets have suddenly became liquid (which is not likely, given the market tensions) or the illiquid assets unexpectedly disappear. Who knows, maybe someone stole them? I heard the recycled paper used for the mortgage-backed market worth more than their intrinsic value…

Now, most analysts bet that the initial sum required for the bailout plan will not be enough, especially when the list of pretenders widens. It is said that the U.S. auto-industry may require $30 billion in loans, but adjusting from the trend seen recently, chances are this sum will get larger in time. As this was not enough, both Intel and Best Buy cut their earnings forecasts on significant consumer slump.

In the Asian session, the Nikkei fell 445.46 points (5.12%) to 8,250.05. The Australian S&P/Asx slipped 155.10 points (3.95%) to 3,772.20. U.S. Futures are running now into the red territory, having the Dow decline 60.00 points and the S&P futures falling 6.60 points.

Crude oil continues to tumble, shedding almost 2/3 of the gains from the top reached earlier this year. Crude oil for December delivery fell $0.73 (1.30%) to $55.43.

Gold fell to a two week low, on the dollar strength. Bullion for immediate delivery declined $5.00 (0.70%) to $713.30.

Previous Wall Street trade: It was a third straight day of declines for U.S. stocks, and the S&P barely avoided finishing above the lowest closing price of the year set on Oct. 27 at 848.90.

Treasury Secretary Paulson said during a news conference on Wednesday that the initial decision to buy troubled mortgage assets of financial institutions was "not the most effective way" to use the $700 billion bailout package. Instead, the Treasury's efforts will focus on consumer debt rather than mortgages.

According to Mr. Paulson, the idea now is to buy securities backed by credit card debt, student loans, auto loans, housing and government agency debt in an effort to help unfreeze those markets.

Paulson said that 40% of US consumer credit is provided through such securities. "This market, which is vital for lending and growth, has for all practical purposes ground to a halt," Paulson said.

Previous European trade: Unicredit was not the only important earnings report released today. In addition, ING, Holland’s biggest bank, reported a 478 million euro loss in the third quarter, the first since the company came to life, back in 1991. Third quarter write-downs reached 1.51 billion euros, on assets related to Lehman’s bankruptcy. The bank also suggested the write-downs might increase during the year. At the same time, Holcim, the biggest European cement maker missed analyst estimates, and announced it will close two factories in the U.S. and one in Spain. In both countries, the housing markets are in deep slumps. The actions taken by Holcim suggest the bottom in the housing market might not be in sight