Thursday January 8, 07:34 AM
Global recession fears deepen as Lenovo axes 2,500 jobs
By David Watkins
HONG KONG (AFP) - Global economic fears deepened as Chinese computer giant Lenovo axed 2,500 jobs and South Korea warned it was on the brink of recession amid further lay-offs in Europe and the United States.
Lenovo, the world's fourth-biggest personal computer maker which had seen double-digit growth in profits until the third quarter of last year, said it would shed roughly 11 percent of its global workforce.
"We are taking these actions now to ensure that in the uncertain economy, our business operates as efficiently and effectively as possible and continues to grow in the future," board chairman Yang Yuanqing said in a statement.
The company's shares plunged 20 percent on the Hong Kong market Thursday, after being suspended Wednesday pending the release of the profit warning.
The depth of the job cuts heightened fears about the health of the Chinese economy, with Lenovo admitting China's recent slowing down "affected what has historically been a major market for the group."
Chinese shares lost 2.48 percent by midday amid continued selling in banks on worries big investors will offload more financial shares, dealers said.
In South Korea, President Lee Myung-Bak called for "pre-emptive" government steps as new official data showed Asia's fourth largest economy teetering on the brink of recession.
A monthly economic outlook report from the ministry of strategy and finance cited falling production and anaemic domestic demand and exports.
South Korean exports plummeted 17.4 percent year-on-year in December, with the contraction likely to accelerate in January, the report said.
Industrial output fell 14.1 percent year-on-year in November, the biggest ever year-on-year contraction, it said.
Australia's largest investment bank Macquarie Group added to the gloom with a warning to investors that exceptionally challenging market conditions in the December quarter would hit profits.
The financial crisis sent its net profit for the half year to September 30 plunging 43 percent to 604 million dollars, while it also reported significant restructuring costs, provisions and writedowns as a result of the turmoil.
Macquarie's shares slumped 5.4 percent following the news.
Japan's share prices closed down 3.93 percent, snapping a seven-day winning streak after grim economic and corporate news triggered heavy losses on Wall Street overnight.
Japanese Prime Minister Taro Aso warned that a tumbling dollar was damaging for Asia's biggest economy, which has large stockpiles of the currency.
The dollar weakened against the euro and the yen Wednesday amid increasing concerns over job losses in the United States, notably a report showing the US private sector lost 693,000 jobs in December.
"A rapid fall in the dollar... is very negative for China or Japan and many countries that own dollars," Aso told parliament.
"We must sustain the dollar-based currency system to protect our national interest."
In Washington, US president-elect Barack Obama was expected to unveil more details of his economic stimulus plan Thursday, warning that drastic action is needed to shrink a record trillion-dollar US budget deficit.
The non-partisan Congressional Budget Office warned the year-old recession would "last well into 2009," making it the longest US contraction since World War II.
"Wall Street has not worked, our regulatory system has not worked the way it's supposed to," Obama said in an interview with CNBC, vowing a "substantial overhaul" of US financial markets.
European workers are also feeling the brunt of the global recession, with official data showing that the number of people out of work in Germany rose by 114,000 in December to 3.1 million.
On Britain's high street, iconic retailer Marks and Spencer (LSE: MKS.L - news) said it would slash up to 1,230 jobs and close 27 stores as consumer spending, the driver of the British economy, shrinks.
Analysts expect the Bank of England to intervene and cut its key interest rate to the lowest ever level.
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