Stocks rise, but grim economic news pours in

Massive stimulus efforts to stave off a global recession steadied stock markets on Thursday, but grim outlooks in China and elsewhere indicated that the economic crisis still had long to run.

London and other world stock markets rallied a day after the EU unveiled a 200-billion-euro (260 billion dollar) stimulus package and after the US Federal Reserve had said it would pump 800 billion dollars more into financial markets.

Also on Wednesday, China bid to boost its slowing economy with its biggest interest rate cut in a decade, slashing lending rates by 108 basis point.

China's top planning minister, Zhang Ping, said the country's economy slowed further in November. He warned of mass unemployment and social unrest, and defended government moves to prop up struggling businesses.

"Some companies have stopped all or part of their operations," said Zhang. "If too many enterprises suspend business or stop production, it will result in large-scale unemployment, and it could trigger social instability."

Elsewhere, companies reported more cuts in jobs and profits.

Japanese consumer electronics giant Panasonic Corp. slashed its net profit forecast for the current financial year by 90 percent due to weak sales.

Norinchukin Bank, the de facto central bank for Japan's farm and fishery cooperatives, announced a 10.5-billion-dollar capital hike to shore up its finances -- the biggest yet by a Japanese bank during the financial crisis.

Automakers announced more layoffs to cope with the industry slump. Mitsubishi Motors Corp. said it would cut 1,100 jobs in Japan while Subaru-maker Fuji Heavy Industries said it would axe 800 posts.

International airlines -- another sector on the front line of the economic downturn -- saw passenger traffic fall for a second consecutive month in October, the industry association IATA said on Thursday.

"The situation of the industry remains critical," said Giovanni Bisignani, director general of the International Air Transport Association.

In Helsinki, the world's biggest mobile telephone maker Nokia said it would stop selling its phones in Japan, saying its sales could not survive there in the current economic climate.

Markets, however, pinned hopes on steps by policy makers to revitalise the world economy in the face of the worst financial crisis since the Great Depression.

Stocks rose 1.95 percent in Tokyo, 3.3 percent in Seoul, 1.4 percent in Sydney and Hong Kong and 1.05 percent in Shanghai.

In Europe, shares gained 2.20 percent in Paris, 1.72 in Frankfurt and 1.58 percent in London in early trading.

Investors were "looking ahead rather than at the shaky ground below their feet," said Kazuhiro Takahashi at Daiwa Securities SMBC in Tokyo.

Wall Street was closed Thursday for the Thanksgiving holiday.

Spain's Prime Minister Jose Luis Rodriguez Zapatero was due on Thursday to outline a stimulus package by his government to support the Spanish construction and automotive industries.

Several other European countries have announced national plans to combat recession, including a huge tax-and-spend program in Britain and a 32-billion-euro package in Europe's biggest economy, Germany.

Share prices also got support from hopes of steps by US president-elect Barack Obama to shore up the US economy, dealers said, as US data suggested the world's biggest economy was sliding into a deep recession.

US consumer spending dropped 1.0 percent in October, the steepest fall since September 2001, while key durable goods orders plunged 6.2 percent and weekly jobless claims rose to a fresh 16-year high.

Against the tide of gloom, researchers at UBS bank said that some plunging industrial forecasts in Europe were heading for a gradual recovery, however.

"We... expect surveys to bottom out during the next few months," they wrote in a report.

You must sign in to comment