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Shares fall after bail-out fails Shares fall after bail-out fails
(29 minutes later)
European and Asian markets have fallen sharply on news the Senate has rejected the US carmaker bail-out package.European and Asian markets have fallen sharply on news the Senate has rejected the US carmaker bail-out package.
Japan's Nikkei share index fell 484.68 points, or 5.6%, to 8253.87, while Hong Kong's Hang Seng index sank 6.9%. Other regional markets also fell.Japan's Nikkei share index fell 484.68 points, or 5.6%, to 8253.87, while Hong Kong's Hang Seng index sank 6.9%. Other regional markets also fell.
In Europe, shares were also lower. The FTSE 100 fell 3.6%, the Cac 40 dropped 5.1% and the Dax was down 4%.In Europe, shares were also lower. The FTSE 100 fell 3.6%, the Cac 40 dropped 5.1% and the Dax was down 4%.
Following the market falls the Japanese government announced a 23 trillion yen (£170.8bn; $254.6bn) stimulus package.Following the market falls the Japanese government announced a 23 trillion yen (£170.8bn; $254.6bn) stimulus package.
The package is designed to boost employment, encourage lending and inject capital into financial markets.
Ten trillion yen will go on tax breaks and public financing while 13 trillion yen will be used to prop up financial markets.
Worried markets
The impact of the failure to agree a bail-out for the US carmakers Chrysler, Ford and General Motors being felt around the world.
"Today, the main thing is the uncertainty around the auto industry and whether or not it will go bust. This has markets worried," said Bernard McAlinden at NCB Stockbrokers.
If they do go under, the European and Asian carmakers will be affected.
"If one of the big auto companies goes bust in the US, this could see a collapse in the entire supply chain. Groups like BMW, Honda and Nissan rely on this supply chain and they would suffer," said Heino Ruland at FrankfurtFinanz.
But it's not just the carmakers that have driven markets down.
News that Bank of America plans to cut 35,000 jobs has also pushed financial stocks lower across Europe.
Stronger yenStronger yen
Japanese carmakers were hit particularly hard as sentiment surrounding the auto sector deteriorated yet further following the rejection by Senate of the the proposed $14bn bail-out of Chrysler, Ford and General Motors. In Japan, shares in carmakers Toyota, Honda and Nissan all fell by at least 10%.
Shares in Toyota, Honda and Nissan all falling by at least 10%. Japanese exporters were also driven lower as the dollar sank to below 89 yen, a 13-year low.
Japanese exporters were also forced lower as the dollar sank to below 89 yen, a 13-year low.
The sharp drop in Asian shares has wiped out gains made during the last week.The sharp drop in Asian shares has wiped out gains made during the last week.
"Investors used the botched US auto bail-out deal as an excuse to pocket the recent gains," Arch Shih at Taiwan Securities said."Investors used the botched US auto bail-out deal as an excuse to pocket the recent gains," Arch Shih at Taiwan Securities said.
The Japanese stimulus package is designed to boost employment, encourage lending and inject capital into financial markets. And the prospects for Wall Street are not good.
The government may also be forced to intervene to stop the yen strengthening further against the dollar. "It's a very bad sign. US stocks will likely nosedive," said Yasutoshi Nagai at Daiwa Securities.
"Without an intervention, the dollar could hit 85 yen, so Japan will likely intervene to prevent that from happening," said Masafumi Yamomoto at the Royal Bank of Scotland in Tokyo.