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Stocks, dollar drop after bailout collapses

HONG KONG - Asian stocks fell sharply on Friday after failure to find a compromise on a $14 billion carmaker bailout in the U.S. Senate put the industry in jeopardy, pushing up U.S. government debt and dragging down the dollar.

U.S. stock futures gapped lower and oil prices extended losses to trade below $46 a barrel after the majority leader of the U.S. Senate said a procedural vote over the bailout would be held later, but predicted it would not pass.

Asian shares had already been under pressure before the auto industry news because of unease about the shrinking financial sector and economic malaise, which doused the bargain hunting that had helped to drive up shares in the last week.

“It shouldn’t come as a surprise that Asian equity markets are selling off today on news of the U.S. auto bailout failure,” said Tim Rocks, equity strategist with Macquarie Securities in Hong Kong.

“For Asia, the major issue is how much damage is being done to earnings and balance sheets, and we won’t know until February when companies announce fourth-quarter earnings,” he said.

The MSCI index of Asia-Pacific stocks outside Japan fell 4.8 percent, eroding more of its double-digit percentage gains in the last week.

Japan’s Nikkei share average sank 5.3 percent, snapping four days of rises.

Shares of Toyota Motor Co were off 10 percent and Honda Motor Co off 13 percent as investors bailed on any firm remotely connected with U.S. car companies.

Hong Kong’s Hang Seng index was down about 6 percent, weighed down by HSBC’s almost 2 percent fall.

The dollar fell to below 90 yen, its lowest in 13 years.

The yield on the benchmark 10-year note, which moves in the opposite direction of the price, slipped to 2.54 percent, down 8 basis points from late New York.