LONDON – World stock markets were mostly lower Wednesday following a steep sell-off on Wall Street, as investors reacted with skepticism to the U.S. government's latest plan to rescue the ailing financial industry with as much as $2 trillion in funding.
By noon in mainland Europe, Britain's FTSE 100 was down 0.04 percent at 4,211.30 and France's CAC 40 slipped 0.3 percent at 3,013.28. Germany's DAX scraped into positive territory and was up 0.1 percent at 4,511.95.
Across Europe, bank stocks dragged down market indexes. Credit Suisse dropped as much as 8.3 percent after Switzerland's second biggest bank reported a fourth-quarter net loss of 6 billion Swiss francs ($5.61 billion), much worse than markets were expecting, as both asset management and investment banking lost money amid the financial turmoil.
As in the U.S., investors across Asian and Europe questioned whether the revamped bailout program, unveiled Tuesday by Treasury Secretary Timothy Geithner, would be enough to absorb the bad assets saddling bank balance sheets and free up frozen credit markets for consumers and businesses.
"It's fair to say that the latest version of the bailout plan in the U.S. was greeted with some disappointment, simply because there was a complete lack of detail which was what investors were hoping for," said Richard Hunter, head of UK equities at Hargreaves Lansdown Stockbrokers in London. "Certainly in drawing a line once and for all over toxic assets, the markets will be waiting for further detail from the U.S. authorities."
He added that disappointed investors had been "going back to more risk averse instruments, such as U.S. Treasuries and gold."
Geithner said the plan to get trillions of dollars in financing flowing through the world's largest economy was urgently needed as part of the government's effort to stave off "catastrophic failure" of institutions. A centerpiece involves the government teaming with the private sector to buy up to $1 trillion in souring assets from financial firms. A separate lending program would be expanded to as much as $1 trillion from $200 billion for consumers and businesses.
But officials were short on specifics about how exactly the public-private partnership might work, analysts said.
Garry Evans, a chief Asian equity strategist with HSBC in Hong Kong, called the plan "muddled." He said the government was skirting around what many investors have already concluded: that the U.S. may have to nationalize the banks for a period.
"They have still philosophically backed away from the ultimate conclusion, which is the government will have to take over financial institutions," he said. "Philosophically that's quite hard for the U.S. government to admit, but the history of banking crises shows that is what governments usually do."
Not even the colossal amounts of money announced in the U.S. are likely to make up the funding shortfall created by the risky mortgage securities and other distressed assets banks are holding, said Paul Schulte, a chief Asia equity strategist at Nomura International in Hong Kong.
The financial hole could be as big as $4 trillion, but U.S. officials have yet to fully explain the scope of the problem, he said.
"The problem is much larger than people thought and the solutions to this much larger problem are still not coherent," Schulte said. "The plan is absolutely a step in the right direction, but we have like 45 more steps to go."
While recouping some of their losses, most Asian markets closed down. In Hong Kong, the Hang Seng tumbled 341.43 points, or 2.5 percent, to 13,539.21, while South Korea's Kospi lost 8.69, or 0.7 percent, to 1,190.18. Japanese markets were closed for a public holiday.
In mainland China, Shanghai's main stock measure sank about 0.2 percent in a choppy session after news of last month's fall in exports, the third straight month of declines.
The collapse in global demand for Chinese textiles, toys and other goods are devastating export-dependent coastal areas. The figures add to the threat of more job losses and increase pressure on Beijing to boost slumping economic growth.
U.S. stock futures pointed to a slightly higher start after markets plummeted the day before as investors soured on the financial rescue. Dow futures were up 0.6 percent at 7,918 and Standard and Poor's futures were up 0.6 percent at 831.
On Tuesday, the Dow industrials fell 381.99, or 4.62 percent, to 7,888.88. Broader stock indicators also tumbled, with the Standard & Poor's 500 index down 42.73, or 4.91 percent, to 827.16. It was the biggest drop for the index since the Obama inauguration on Jan. 20.
In oil, light sweet crude for March delivery rose 44 cents to $37.99 a barrel in European trade. The contract fell $2.01 to settle at $37.55 overnight.