Recession fears deepen

November 18, 2008
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, TOKYO, November 18 – Asian shares fell Tuesday on mounting fears of an extended global recession after US banking giant Citigroup announced 50,000 job cuts and carmakers on both sides of the Atlantic pleaded for help.

Investors were unsure where the next boost to the global economy would come from, after world leaders vowed at a weekend summit to cooperate to galvanise growth but stopped short of announcing specific steps.

"Market eyes are on global recession fears," Kazuhiro Takahashi, general manager at Daiwa Securities SMBC, said, with Japan following Germany and other eurozone countries into recession.

"The financial summit has left the impression that economic stimulus measures are unlikely to get into gear," Takahashi added.

Asian markets were mostly lower in early trade as bad news on the economy kept buyers at bay.

Stocks fell 0.96 percent in Tokyo, 1.7 percent in Hong Kong, 2.3 percent in Seoul and 1.0 percent in Sydney.

"Asian equities are likely to decline in correlation with Wall Street but the US market is ripe for a rebound," CFC Seymour chief investment strategist Dariusz Kowalczyk said in Hong Kong.

Meanwhile the fallout from the global financial crisis widened.

The International Monetary Fund agreed a 518-million-dollar line of credit for Serbia to help the country weather the turmoil.

In Germany, executives of German automaker Opel turned to Chancellor Angela Merkel for government help in case its US parent company General Motors goes bankrupt.

Opel said Friday that it needed the German state to guarantee more than one billion euros (1.3 billion dollars) in loans.

Australia\’s biggest investment bank, Macquarie Group, said its first-half net profit plummeted 43 percent amid the global financial crisis.

Worries about the future of Citigroup deepened after the banking behemoth said it was slashing its global workforce by about 20 percent compared with its peak level of 375,000 in late 2007.

Last month, Citi reported a third-quarter loss of 2.8 billion dollars, its fourth straight quarter in the red.

Douglas McIntyre, analyst at 247 Wall Street, said Citi\’s plummeting share price "leaves the question of whether Citi becomes the next Wachovia or the next AIG," referring to financial giants bailed out by the US government.

Also Monday, banking giant HSBC said it had cut 450 staff in Hong Kong in anticipation of a deteriorating global economy.

Yahoo, whose share price has plunged over the past year, said co-founder Jerry Yang, who spurned a takeover offer from Microsoft earlier this year, was stepping down as chief executive of the pioneering Internet company.

Markets remained on recession watch following a slew of gloomy data.

The US economy probably went into recession in April, in a downturn likely to last 14 months, according to a survey of forecasts released Monday by the Philadelphia Federal Reserve.

The 51 economists on average predicted an annualised drop in US economic output of 2.9 percent in the fourth quarter and a 1.1 percent decline in the first quarter of 2009.

Japan, Germany, Italy and Ireland are among the developed nations already in recession.

Treasury Secretary Henry Paulson and Fed chief Ben Bernanke were due to testify Tuesday to Congress on the 700-billion dollar Wall Street bailout plan.

The chiefs of the "Big Three" US automakers were also to travel to Congress to plead with lawmakers to save their American industry, amid fading hopes for a quick congressional bailout.

Democrats have launched a push to pass a 25-billion-dollar rescue package for the auto industry but the White House warned against draining funds from a huge finance industry bailout.

The Dow Jones Industrial Average dropped 2.63 percent Monday as a series of rally attempts failed to hold and selling accelerated late in the day.

"Wall Street, as well as Main Street, continues to suffer from a massive lack of confidence," said Fred Dickson, market strategist at DA Davidson & Co.

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