U.S. stock futures edged lower Wednesday as the U.S. government’s bailout of American Insurance Group
failed to allay fears the credit crisis will claim more victims.

Late Tuesday, the U.S. government agreed to take over the troubled insurance giant in an US$85 billion bailout. AIG’s shares lost 69% Monday and Tuesday.

In today’s economic news, U.S. home construction tumbled a second month in a row during August.

Housing starts decreased 6.2% last month to a seasonally adjusted 895,000 annual rate, the U.S. Commerce Department said. Single-family home groundbreakings also declined, and building permits fell sharply.

Separately, the U.S. current account deficit widened in the second quarter, pushed higher by rising oil imports.

Here at home, non-residents reduced their holdings of Canadian securities in July, both bonds and equities, Statistics Canada reported.

Canadian investors resumed acquisitions of foreign equities, while further disposing of foreign debt instruments, StatsCan said.

The Canadian dollar opened at US93.87¢, up 0.37 cent, as the price of crude oil revived.

Crude oil futures rose US$2.80 to US$93.95 a barrel ahead of weekly inventories data.

In earnings news, Nortel Networks Corp. said it is cutting its business outlook and plans another round of cutbacks and the sale of a key asset as it suffers from “a sustained and expanding economic downturn.”

After markets closed Tuesday, investment bank Morgan Stanley surprised investors by releasing better-than-expected quarterly results.

In today’s M&A news SanDisk has turned down a US$5.85 billion takeover bid from South Korea’s Samsung Electronics.

Overseas, Japan’s Nikkei stock average rose 1.2% after AIG’s rescue, but Hong Kong’s Hang Seng index lost 3.6%.

The FTSE 100 was down 2.4% near midday in London, while Germany’s DAX index and the French CAC-40 showed minor gains.

On Tuesday, U.S. markets managed to bounce back slightly, but the descent continued in Canada.

The S&P/TSX composite index finished the day down another 27 points, or 0.22%, to 12,226.99, while the junior S&P/TSX Venture composite index declined 75.77 points, or 4.94%, to 1,459.04.

In New York, U.S. stocks rallied after the U.S. Federal Reserve left its benchmark fed funds rate unchanged at 2%.

The Dow Jones Industrial Average snapped a two-day losing streak, increasing 141.51 points, or 1.3%, to close at 11059.02.

The S&P 500 gained 20.9 points, or 1.8%, to 1,213.6, while the tech-heavy Nasdaq Composite climbed 27.99 points, or 1.3%, to 2,207.9.

IE