Economic woes increase, crisis deals in trouble

LONDON (REUTERS): A number of deals designed to cure the global financial crisis were in danger of unravelling on Wednesday, with losses mounting at banks and economies showing further signs of serious deterioration.

The euro zone, Britain, China and South Africa reported data supporting the arrival of a global recession and prompting expectations of further interest rate cuts.

"We are certainly prepared to cut ... again, if that proves to be necessary," Bank of England Governor Mervyn King told a news conference after UK inflation was forecast to be minimal.

The International Monetary Fund withheld official backing for a $6 billion bailout plan for Iceland, the Financial Times reported, putting loans to the North Atlantic island nation under threat.

Some of British banking giant Barclays' biggest shareholders have threatened to vote against a planned 7 billion pound ($10.83 billion) capital raising unless it improves the terms of the deal, British newspapers said.

The latter follows a row over the crisis-driven planned purchase of British lender HBOS by Lloyds TSB with leading banking figures arguing a more competitive deal should be sought.

Aides to U.S. President-elect Barack Obama, meanwhile, were playing down reports of tension with the Bush administration over help for the stricken car industry.

A feud within Japan's cabinet over whether rich people should get payouts as part of a stimulus package looked set to be put aside after delaying the plan for weeks.

Questions were also beginning to be asked about just how much help governments can give.

"The U.S.' financial resources are already stretched and a flood of new demands may overwhelm a government already staring down at a record budget deficit next year," UBS economists said in a note.

SEESAW

Financial markets seesawed again under the combined pressure of a global economic downturn and the worst financial crisis in 80 years.

Wall Street looked set for a flat to negative start and European shares dipped in and out of positive territory after losing more than 4 percent on Tuesday.

There were more corporate profit warnings with General Motors shares falling on Tuesday to levels not seen since World War Two.

"Whether it's economic indicators or company news, it's just too awful," said Takashi Ushio, head of the investment strategy division at Marusan Securities in Tokyo.

The financial crisis continued to take its toll with France's Natixis SA announcing falling investment banking revenue and Italy's UniCredit posting a sharp drop in quarterly net profit.

In Germany, troubled property lender Hypo Real Estate Holding AG posted a pretax loss of 3.1 billion euros ($4 billion) in the third quarter, more than analysts had expected. Losses and property writedowns ate into its income.

Dutch group ING posted its first-ever quarterly loss due to impairments on stocks and bonds, counterparty losses and property writedowns.