Thursday, 16 October 2008

U.S. reports grim data, EU vows to shield economy

Major U.S. banks reported huge losses and other data painted a grim outlook for the U.S. economy on Thursday as Europe vowed to shield its industries from the global crisis that hammered markets again.

EU leaders pushed plans for a global summit to overhaul the world financial system, as Switzerland took on $60 billion of bad debt from UBS and European stocks fell.

"The whole cliche of Wall Street arriving on Main Street is so true now, with recession in the U.S., the UK, Europe and probably Japan, and significant slowing elsewhere," said Bernard McAlinden, strategist at NCB Stockbrokers in Dublin.

Japan's Nikkei fell 11 percent to suffer its worst one-day drop since the stock market crash of October 1987, European stocks slid again and more bad economic news in the United States deepened the gloom.

One bright spot was that rates banks charge each other for loans mostly fell on Thursday in response to radical moves by central banks to provide liquidity, shore up banks and loosen credit lines to institutions needing cash.

In the real economy, however, the news from the United States was mostly grim.

Investment bank Merrill Lynch wrote down $5.7 billion of toxic assets and Citigroup reported a quarterly net loss of $2.8 billion.

U.S. home builder sentiment sank to an all-time low in October, motorcycle maker Harley-Davidson Inc cut its earnings forecast, General Motors said it would lay off 1,500 workers and big U.S. manufacturers braced for a slowdown.

U.S. industrial production dropped the most in 34 years in September and factory activity in the U.S. mid-Atlantic region fell to an 18-year low in October.

"We should anticipate further declines in employment and softness in most components of demand for goods and services," said Gary Stern, president of the Minneapolis Federal Reserve Bank.

European stocks ended down around 5 percent while Wall Street's Dow and S&P 500 indexes swung between positive and negative in choppy trading.

Source: EconomicTimes

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