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EU split on rescue plan
NEW YORK |
NEW YORK (Reuters) - EU member nations squabbled over how to rescue their economies from the credit crisis and recession as U.S. Republican senators opposed a bailout of the U.S. auto industry and the dollar entered rocky territory.
Cracks in the global rescue effort emerged just as the U.S. mortgage market -- the spark that set off all the trouble -- showed further distress with a report that foreclosure activity jumped 28 percent year-on-year in November when one in every 488 U.S. households received a foreclosure filing.
Meanwhile the latest U.S. jobs data showed new unemployment claims surging to a 26-year high.
Wall Street was little changed in midday trading, held back by concerns that Senate Republicans might block the $14 billion auto industry loans that the House of Representatives approved late on Wednesday.
Europe's FTSEurofirst closed down 0.7 percent and Japan's Nikkei ended with a 0.7 percent gain.
The dollar showed long-anticipated signs of weakness that analysts expected considering low U.S. interest rates and the deficit spending that will come with economic bailouts.
It fell to a seven-week low versus the yen and a six-week low versus the euro after a rally since July that had been aided by rapid deleveraging, repatriation and relative weakness in Asian and European economies.
Technical factors also weighed on the U.S. currency.
Famed investor Jim Rogers said he has been using greenback strength as an opportunity to exit dollar-denominated assets.
"The dollar is a terribly flawed currency, and perhaps a doomed currency. I've driven around the world looking for a sound currency. There aren't any ... but the yen is the only thing that's going to go up for a while," said Rogers, co-founder with George Soros of the Quantum Fund, at the Reuters Investment Outlook Summit 2009.
EUROPEANS AT ODDS
With European Union leaders set to meet in Brussels to discuss a 200 billion euro (177.6 billion pound) stimulus package, Germany criticized other member states for rushing into debt with untested bailout plans.
"The speed at which proposals are put together under pressure that don't even pass an economic test is breathtaking and depressing," German Finance Minister Peer Steinbrueck said in an interview with Newsweek magazine.
He singled out Prime Minister Gordon Brown, saying, "The switch from decades of supply-side politics all the way to a crass Keynesianism is breathtaking."
Another German policymaker, European Central Bank Executive Board member Juergen Stark, said the European Central Bank does not have much room to manoeuvre after the latest interest rate cut.
The White House was pressing sceptical Republicans in the Senate to back the $14 billion bill to prop up Detroit's Big Three carmakers.
But With President George W. Bush's influence waning ahead of his January 20 hand-over to Barack Obama, "no one cares what the White House thinks," a senior Republican aide said.
Failure of any of the so-called Big Three carmakers -- Ford, General Motors or Chrysler -- would threaten countless jobs and send shock waves through the global supply chain.
U.S. foreclosure activity dipped 7 percent in November from October but jumped 28 percent compared with the same month a year ago and will continue to soar without a broad permanent fix for troubled loans, said RealtyTrac, a California-based research firm.
U.S. banking regulators estimate that banks will foreclose on 2.25 million U.S. homes this year, more than double the 1 million annual rate before the housing crisis, which spread throughout the financial system through the proliferation of mortgage-backed securities.
Deflation pressures spreading through Europe and the United States also appear to be threatening China, the world's fourth-largest economy. Deflation, a drop in prices, tends to defer spending and makes it harder for governments to boost growth.
China's annual consumer price inflation fell to a near two-year low in November, a report showed on Thursday, a day after data reflected a fall in wholesale prices and a startling drop in exports and imports.
The slowdown in inflation is partly due to a collapse in global energy and commodity costs, but it also reflects demand-sapping recessions under way in Europe, Japan and the United States.
(Reporting by Reuters bureaus worldwide; Editing by Steve Orlofsky and Brian Moss)
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