My finance view

Barack Obama took office on Tuesday with bank shares tumbling, the car sector teetering and a world economy in tatters, and the new U.S. president vowed to meet the daunting challenges.

The first African-American to become U.S. president swore to preserve, protect and defend the Constitution against a backdrop of a deep economic downturn, a trillion dollar federal deficit and fears of more bank losses.

His aides vowed to go to work immediately, armed with the authority to spend the second half of the $700 billion financial rescue plan and a proposed stimulus package of $550 billion in spending and $275 billion in tax cuts.

“That we are in the midst of crisis is now well understood,” the new president said, mentioning war, a battered economy and sagging confidence.

“Today I say to you that the challenges we face are real. They are serious and they are many. They will not be met easily or in a short span of time. But know this, America — they will be met,” he said upon taking the oath.

Obama is riding a wave: A CBS News/New York Times poll showed 79 percent of Americans are optimistic about the next four years. At the same time, George W. Bush leaves the White House as one of the most unpopular presidents in history, with his approval rating at 22 percent.

“The inauguration is crystallizing all expectations that the U.S. economy will be the first to recover from the recession,” said Marco Annunziata, global chief economist at UniCredit, Italy’s second-biggest bank, in London.

But that did not help the Dow faxless payday advance.DJI, which was down about 2 percent at midday, extending its losses for the year to more than 7 percent. .N

Shares in major U.S. banks were down double digits after State Street Corp (), the world’s biggest institutional asset manager, posted rising unrealized losses in its commercial paper program and investment portfolio.

State Street stock plummeted 50 percent while Citigroup (), Bank of America (), JPMorgan Chase & Co () and Wells Fargo () were all battered.

Europe’s banking index fell to a 14-year low on fears that lenders will need more state help to raise capital as recession bites and bad debts rise. Shares in Lloyds () dropped 31 percent and Barclays () fell 17 percent.

On Monday, Britain threw its troubled banks a second multibillion-pound lifeline in three months and gave its central bank approval to pump cash into the ailing economy because interest rates were close to zero.

“After yesterday’s carnage, the smoke is still hanging over the market,” says Justin Urquhart Stewart, director at Seven Investment Management. .EU

Concerns about the British banking sector pushed the British pound below $1.39 for the first time since June 2001.

European shares .FTEU3 fell 2 percent despite a better-than-expected ZEW analyst and investor sentiment index report in Germany. The monthly poll of economic sentiment by the ZEW economic think tank rose to -31.0 from -45.2 in December. 

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