U.S., UK recessions deepen (Seems we arent alone)

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15 years 3 months ago #1 by misterpat
U.S., UK recessions deepen


WASHINGTON/SINGAPORE (Reuters) - Bleak housing data showed the United States and Britain were sinking deeper into recession and authorities from Washington to Tokyo worked hard to spend their way out of the worst downturn in decades.

Japan's government on Wednesday approved its biggest-ever budget to revive its economy while U.S. President-elect Barack Obama sought to clinch a deal with congressional lawmakers on a massive stimulus package before the Christmas Day.

A record drop in U.S. existing home sales and prices last month reported on Tuesday showed the world's biggest economy was on track for what one Federal Reserve official said could be the longest downturn since the World War Two.

Housing is at the root of the year-long U.S. slump and the global malaise and economists expect the economy to decline much more in the current quarter after a 0.5 percent contraction in the third quarter. Britain, the world's fifth-largest economy, is in an equally dire shape.

The Royal Institution of Chartered Surveyors said house prices were set to fall by 10 percent next year, confirming the bleak outlook after Tuesday's data showed the economy shrinking by 0.6 percent in the third quarter.

"Lenders are likely to remain cautious in the near term. This, coupled with an increasingly gloomy economic picture, suggests that house prices will continue to decline in 2009," RICS chief economist Simon Rubinsohn said.

The relentless flow of bad news overshadowed rescue efforts and prompted a warning from European Central Bank President Jean-Claude Trichet that investors could be overlooking the importance of steps already taken by policymakers.

Japan had its share of gloom this week, reporting a record drop in exports -- the mainstay of an economy dogged by weak consumer spending -- and a similarly sharp collapse in business sentiment.

RECORD BUDGET

Grim data and warnings from central bank governor Masaaki Shirakawa fanned expectations that the central bank will cut its key rate to zero from 0.1 percent and revive a policy of flooding banks with interest free cash it abandoned just two years ago.

Doing its part, Japan's cabinet approved a record 88.5 trillion yen ($980.6 billion) budget for the next fiscal year starting in April, designed to accommodate part of 12 trillion yen in extra spending on government stimulus packages.

But markets were skeptical whether unpopular Prime Minister Taro Aso will have the political muscle to push the budget and other related bills through a divided parliament.

In Washington, Barack Obama's team was nearing agreement with congressional Democrats on a huge emergency spending bill intended to jolt the weak U.S. economy and create 3 million jobs over two years, Vice President-elect Joe Biden said on Tuesday.

Asked whether an agreement would be reached by Christmas, Biden said: "I think we're getting awful close to that."

In recent days, government sources have talked about moving a bill through Congress next month with a price tag in the range of $675 billion to $775 billion over two years.

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15 years 3 months ago #2 by misterpat
But rounds of aggressive interest rate cuts, bank bailouts, and massive spending totaling trillions of dollars, have failed to cheer up investors pounded by a daily barrage of news of layoffs, corporate losses and grim economic statistics.

On Tuesday, Spain, Europe's fifth-largest economy, declared it had stumbled into recession and New Zealand data showed it was suffering its worst contraction in eight years.

PRAYER FOR VICTIMS

In a telling sign how bad things have become, Australia's religious leaders saw it necessary to speak up, calling for support for victims of the financial crisis and asking "how the international captains of finance could have got it so wrong."

"We celebrate Christmas this year at a time of economic turbulence throughout the world unknown since the 1930s," said Catholic Archbishop of Sydney Cardinal George Pell.

"This situation is unlikely to improve quickly, even here in Australia, so our first thoughts should be with those who have already lost their jobs," he said.

Markets, resigned to the fact that emergency action may fail to prevent the worst global downturn since the Great Depression, struggled for direction on Wednesday as investors looked forward to the end of a horrid 2008.

Stocks in Hong Kong and Sydney rose on the last day before the Christmas holiday but Tokyo followed Wall Street lower, losing 2.7 percent.

Investors dumped Toyota and other auto-related stocks after the world's top carmaker forecast its first-ever annual operating loss.

ECB chief Jean-Claude Trichet said markets were underestimating the impact of central banks' and governments' response to the financial crisis.

"There is an underestimation in the financial sphere of the very great importance of the decisions that were taken," Trichet told said in a speech at a Paris think-tank on Tuesday. He said banks were still "very influenced" by mistrust that had set in from mid-September when the crisis culminated with the bankruptcy of Lehman Brothers.

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15 years 2 months ago #3 by phase1
LONDON – World markets fell Friday as investors were disheartened by weak corporate and economic figures and confirmation that Britain plunged into recession at the end of last year.

The news that Samsung saw its first-ever quarterly loss came on the heels of Thursday's bleak U.S. unemployment and housing figures and Microsoft's announcement of its first mass layoffs in its 34-year history. And as investors came to their desks Friday morning, official data showed Britain's economy shrank 1.5 percent in the fourth quarter — the sharpest quarterly downturn since the early days of Margaret Thatcher's government almost 30 years ago.

European markets mostly recouped their earlier losses after the Dow — which fell 210 to 7,912 in the opening minutes of trading — recovered to 8,042, or 80 points down, in morning trade in New York. The Standard & Poor's 500 index was down 0.19 percent and the Nasdaq composite index rose 0.53 percent.

Dow component General Electric Co. reported fourth-quarter profits Friday morning that were in line with analysts' expectations but at the bottom end of the company's guidance. Its shares fell 6.01 percent, further weighing on sentiment.

Copier and printer maker Xerox Corp. said profits fell to $1 million for the three months ended Dec. 31, from year-ago profit of $382 million. Its stock was down 9.5 percent, after slumping at one point by 20 percent.

European markets were spooked by news the British economy had officially slid into recession.

Britain's benchmark FTSE 100 index closed up a slight 0.01 percent to 4052.47. Germany's DAX closed down 0.96 percent at 4,178.94, and France's CAC 40 shed 0.71 percent to 2,849.14.

Analysts said the general sharp deterioration in stock markets reveals an increasingly pessimistic outlook for the year ahead, with bad economic news coming thick and fast from all corners of the globe. That is pushing investors to drop riskier equities in favor of lower risk government bonds, or gold.

"The race to the bottom amid G-7 economies speeds up the risk-reduction trades as macroeconomic data pushes superlatives to higher levels," said Ashraf Laidi, chief market strategist at CMC Markets.

The fall in British economic output, for example, was worse than the market expected and surprised with sharp drops in industrial production and services.

"Clearly this sets a very weak platform for GDP growth this year and suggests that our forecast for a 2.5 percent drop could be too optimistic," said Vicky Redwood, analyst at Capital Economics in London.

Europe's losses followed even sharper drops in Asia, where Japan's Nikkei 225 dropped 3.8 percent to 7,745.25, while Hong Kong's Hang Seng Index eased 0.6 percent to 12,578.60 and South Korea's Kospi sank 2.1 percent to 1,093.40.

Both financial and technology stocks were under pressure on fears a deeper global downturn would continue to weigh on corporate earnings.

Barclays stock was down 13.5 percent in London on worries it may require a bailout from the British government in a plan which may mean part-nationalization. Auto companies also saw steep falls, with BMW down 3.8 percent in Frankfurt, while chip maker Infineon AG fell 4.9 percent after its unit Qimonda declared bankruptcy.

"Profit concerns continue to intensify, with consensus estimates now looking for an overall fall of around 28 percent in Q4 earnings in the S&P 500," said Mitul Kotecha at Calyon in London.

Investors were stunned overnight by news software giant Microsoft Corp. was slashing 5,000 jobs and had suffered an 11 percent drop in profit last quarter. Upbeat earnings by Google Inc. did little to alleviate investors' sour mood.

The gloom was echoed in Thursday's U.S. economic data, which showed construction of new homes and apartments slid 15.5 percent in December, closing out the worst year for builders since at least 1959. Meanwhile, first-time applications for unemployment benefits jumped last week to 589,000, the most since 1982.

Things were similarly bleak across Asia, where Japan's Sony Corp. projected its first annual net loss in 14 years and announced job cuts. In South Korea, Samsung Electronics, the world's largest manufacturer of flat-screen televisions and memory chips, posted its first ever quarterly loss Friday as the slowdown hit prices.

Shares of Sony tumbled 7 percent to their lowest level in a month. Nippon Steel Corp., Japan's biggest steelmaker, lost 5 percent after saying it would cut production by the largest amount in its four-decade history as auto demand gets squelched by the global slowdown.

"I don't see any signs of revival in the economy this year, definitely not," said Peter Lai, investment manager at DBS Vickers in Hong Kong. "There are too many uncertainties, too much negative news. I don't think the worst is over."

Oil prices were lower, with light, sweet crude for March delivery falling $1.26 to $42.41 a barrel. The contract rose overnight 12 cents settle at $43.67.

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