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European markets fall as U.S. auto bailout fails - European commentary

The European markets fell for the second day on Friday amid fears that the U.S. Senate's rejection of a bailout for American automakers will exacerbate the global recession.

The compromise plan to provide emergency funding to Detroit's "Big Three" was shot down in the U.S. Senate late Thursday evening, as talks collapsed when Republican leaders refused to go along with the rescue plan for Ford, General Motors and privately held Chrysler LLC.

The vote in the senate had failed to accrue the 60 votes needed to pass, going down by a 52-35 margin.

However, hopes for a bailout were revived after White House spokeswoman Dana Perino said Friday that the Bush administration would consider other options if necessary - including the use of the TARP program" to prevent the collapse of the U.S. auto industry.

In economic news, The U.S. Commerce Department said today that retail sales dropped 1.8% in November to reach a level of $355.7 billion. This marked the fifth consecutive month of declines, though November's slide was more modest than the 2.9% drop seen in the previous month. The decline was also less severe than had been generally expected, with economists looking for a fall of 2%. Stripping out the auto sector, retail sales were down 1.6% after a slide of 2.4% the previous month.

The U.S. Labor Department said its producer price index fell 2.2% in November following an unrevised 2.8% decrease in October. The decrease was slightly steeper than economists' expectations of a 2.0% drop.

Core producer prices, which exclude food and energy prices, edged up 0.1% in November after rising 0.4% in October. The modest increase came in line with economist estimates.

The Eurostat said October industrial production in the Eurozone fell at the fastest pace since July 1993. Industrial production plummeted 5.3% year-on-year in October, following a revised 2.7% fall in September. Economists had expected a 3.8% drop in output for the month.

Meanwhile, European Union leaders have agreed on a €200 billion ($267 billion) stimulus package to boost the flagging European economy.

In a statement issued in Brussels on the second and concluding day of the summit, the leaders said they were confident the package would "make a decisive contribution to the European economy's rapid return to the path of growth and job-creation."

Crude for January delivery fell $2.55 to $45.43 a barrel on the New York Mercantile Exchange, by the time the European markets closed, amid fresh evidence of the U.S. recession and news that the proposed government bailout of U.S. automakers failed to pass in the Senate.

The FTSEurofirst 300 index of pan-European blue chips closed 2.83% lower at 829.65 points, while the narrower DJ Stoxx 50 index fell 2.90% to 2,079.83 points.

Around Europe, the U.K.'s FTSE 100 index slipped 2.47% to 4,280.35, while France's CAC 40 index dropped 2.80% to 3,213.60 and Germany's DAX index fell 2.18% to 4,663.37.

Automotive stocks lost ground after senators voted down a bill to provide emergency funds for U.S. automakers. BMW, the world's biggest maker of luxury cars, fell 2%, while Daimler, the second biggest, dropped 4.2% and Peugeot, Europe's second biggest carmaker, slipped 5%. Renault, France's second biggest carmaker, lost 6.1%.

HBOS, Britain's biggest mortgage lender that is being taken over by Lloyds TSB, tumbled 23% after the company reported a bigger-than-estimated increase in corporate delinquencies. Lloyds TSB shares lost 17.8%.

Nokian Renkaat, Nordic region's biggest tiremaker, slid 13% after the company said fourth quarter sales have been weaker than expected.

Heavily weighted oil stocks slipped after crude oil prices retreated. BP, Europe's biggest oil company, dropped 3.9%, while Royal/Dutch Shell, the second biggest, fell 2.7% and Total, the third biggest, declined 3.9%.

by RTT Staff Writer

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