Global, U.S. Markets Struggle as Worries Persist for Automakers

Investors were less likely to buy riskier stocks, sending Asian markets sliding overnight, followed closely by European stocks falling two percent or more. The weak economic readings from China, Japan and Britain have investors looking to the upcoming global financial summit on Saturday in Washington for help and guidance.

China, which has seen rapid economic expansion in recent years, reported that its import growth slowed in October and inflation fell to a 17-month low as domestic demand for goods has cooled. This comes as a huge blow as investors had hoped that China would be able to continue its ever-growing economic pace to offset the impact of falling growth in the developed world. In the U.K., retail sales fell by the biggest amount in more than three years last month and housing prices are at their lowest in 30 years.

"These are seriously poor numbers, especially in the run-up to Christmas," Stephen Robertson, director general of the British Retail Consortium, told Reuters.

In the United States, the news continued to worsen. Starbucks Corporation plans to halt plans for new international coffee shops. It cut its 2009 forecast after the company saw a steep slide in fourth-quarter profits, falling way below analysts' expectations.

In Tuesday morning trading, U.S. markets followed the downward trend of Asian markets with the Dow Jones industrial average, the Nasdaq and the Standard & Poor's 500 index all down roughly 3 percent.

Market anxiety spread to U.S. automakers; President-Elect Barack Obama said in a meeting at the White House on Monday that he would support President Bush if he would provide immediate emergency aid to the industry. General Motors' shares plunged to their lowest levels in 60 years to $3.36; in reaction, the company announced late Monday that it would slash 1,900 factory jobs in addition to the 3,600 job cuts announced last Friday. Market analysts are predicting that the company may not survive the year without a government bailout.

All three major automakers, G.M., Ford and Chrysler, are in trouble, using unsustainable amounts of cash to keep them afloat. The Detroit-based Center for Automotive Research claimed that if all three companies folded, it would cost nearly three million jobs and billions in lost taxes.

Troubled mortgage giant Fannie May continued to post losses even after the government seized the company and its sister company, Freddie Mac in September. In a sign that many homeowners are continuing to fall behind on their mortgages, Fannie May lost $29 billion during the third quarter, more than it earned from 2002 to 2006.

"Credit losses are rising, and need for reserves is still increasing," said Moshe Orenbuch, an analyst who follows Fannie and Freddie for Credit Suisse told the New York Times. "This is bad news, not just for Fannie, but for the whole economy. The message from these results is that we're going to continue seeing housing problems for at least a year."

As the United States government continues its bailout of American banks, American Express won approval late Monday night from the Federal Reserve to become a commercial bank, allowing the credit card giant to accept deposits and permanently access the $700 billion in government bailout money.