World stocks slip as auto crisis deepens

Global stock markets stumbled on Wednesday as fears mounted of a collapse of the huge US automobile industry, a key pillar of the United States economy.

"Lingering concerns over US auto makers pose further risks to equities," Barclays Capital analyst David Woo said in London.

By late morning trading, the London stock market had lost 1.92 per cent in value compared to Tuesday's close, Frankfurt slid 1.44 per cent and Paris shed 1.70 per cent.

Tokyo on Wednesday closed down 0.66 per cent, Hong Kong fell 0.77 per cent and Sydney dropped 0.7 per cent.

US Treasury Secretary Henry Paulson had on Tuesday warned there was no immediate relief in sight for the American economy, but he ruled out dipping into a giant Wall Street bailout package to help his country's struggling "Big Three" automakers.

"The crisis in our financial system had already spilled over into our economy and hurt it. It will take a while to get lending going and repair our financial system, which is essential to an economic recovery," Paulson told a hearing of the House of Representatives Financial Services Committee.

US automakers return to Capitol Hill on Wednesday, hat in hand, a day after warning lawmakers that the economy faced a "catastrophic collapse" if the government does not come through with $US25 billion ($A38.34 billion) in loans needed to keep their businesses afloat.

But quick passage of the bailout seemed unlikely amid opposition from the Bush administration and sceptical lawmakers who on Tuesday questioned whether General Motors, Ford and Chrysler would be able to pay back the loans or if the money would simply be used to perpetuate failure.

After a heated four-hour debate with members of the Senate banking committee, executives from Detroit's Big Three were set to have another chance to press their case before a House of Representatives panel on Wednesday.

"The auto industry is related to many other industries and the negative impact (of its possible collapse) on employment is unfathomable," said Daisuke Uno, chief strategist at Sumitomo Mitsui Banking Corp.

US stocks made modest gains on Tuesday as investors swung between Hewlett-Packard's upbeat outlook and the depressing economic climate.

The Dow Jones Industrial Average rose 1.83 per cent and the tech-heavy Nasdaq closed up 0.08 per cent.

The broad Standard & Poor's 500 index advanced 0.98 per cent.