Recession alarm rings around the world

October 24, 2008
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, PARIS, October 24 – Giants of the auto, airline and technology industries ordered emergency action against the global financial crisis on Friday as shares took a new hammering amid mounting gloom.

Even a 1.5 million barrel a day production cut by OPEC failed to stop oil prices falling amid fears of a deep global recession.

Grim news backing those fears came from around the world.

Asian leaders agreed to set up an 80-billion-dollar war fund to fight what ex-US Federal Reserve chief Alan Greenspan called a "once-in-a-century credit tsunami".

French auto giants PSA Peugeot-Citroen and Renault ordered huge production cuts, while Japan\’s hi-tech giant Sony Corp. and Europe\’s biggest airline Air France-KLM issued a grim earnings and profits warnings.

In Britain, official figures confirmed the country is about to enter a recession while Turkey\’s central bank took action to strengthen bank liquidity and prop up the slumping currency.

The combined impact sent shares tumbling in both Asia and Europe after overnight falls in Wall Street.

Japan\’s Nikkei index plunged 9.60 percent, ending below the key 8,000-point level for the first time in more than five years, and Hong Kong fell 8.3 percent.

French shares plummeted 10.62 percent in morning trade to their lowest point in over five years before rallying slightly while Frankfurt\’s DAX 30 index slumped 10.13 percent and London\’s FTSE 100 index by more than nine percent.

"The best word to describe what\’s going on right now is panic," said Credit Suisse strategist Satoru Ogasawara.

Technology giant Sony, a bellwether of corporate Japan, saw its shares plunge more than 11 percent after forecasting net profit of 150 billion yen (1.55 billion dollars) for the year to March, down 59 percent on last year.

South Korea\’s Samsung Electronics, the world\’s largest memory chip maker, also reported a 44 percent fall in third-quarter net profit.

Air France-KLM suffered a near nine-percent drop in its share price after acknowledging it would be "very difficult" to meet its billion-euro (1.28-billion-dollar) earnings target.

Europe\’s biggest airline unveiled a plan to cut costs by up to 1.2 billion euros (1.53 billion dollars) over the next five years.

The suffering extended to the auto industry with Renault ordering almost all French plants closed for at least one week and shorter shutdowns in Turkey, Russia and Slovenia.

"We are in a period when, without doubt, markets are collapsing and to avoid a brutal degradation in the company\’s situation, we have to manage stocks in an extremely tight way," said a Renault spokesman.

PSA Peugeot-Citroen chairman Christian Strieff said he had had ordered "massive" production cuts as the group forecast a 17-percent fall in car sales in Western Europe in the fourth quarter.

Company officials confirmed that the slowdown would amount to a 30 percent production cut and that plants in France would lose between two and 16 days of work each in the last three months of 2008.

There would also be cut-backs at Peugeot\’s sites in Madrid and Vigo in Spain and at Trnava, in Slovakia, they said.

ArcelorMittal, the world\’s biggest steel producer, also called a temporary halt to production in France, Germany and Belgium, according to union chiefs after a meeting with management.

New figures showed industrial confidence in both France and Italy had fallen to the lowest level since 1993.

Adding to their woes, OPEC oil ministers decided at emergency talks in Vienna to cut output by 1.5 million barrels per day from November 1.

The cut was designed to increase prices but Brent North Sea crude for December delivery slumped to 61.08 dollars per barrel, the lowest point since March 2007.

British Prime Minister Gordon Brown said recently any reduction designed to push up prices would be "scandalous" at a time when major world powers are close to recession.

New figures meanwhile showed Britain\’s economy shrank by 0.5 percent in the three months to September, compared with the previous quarter, marking the first contraction since 1992.

The country\’s economy screeched to a halt in the second quarter with zero growth. However, it must experience two successive quarters of negative economic growth to be classed as in recession.

China, Japan and 11 other Asian nations agreed to set up an 80-billion-dollar war chest to save beleaguered currencies in the most ambitious regional plan yet to cope with the financial crisis.

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