Monday November 10, 05:22 PM
Stocks jump but European economies stagger
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PARIS (AFP) - The global economic storm raged unabated on Monday with fresh warnings of recession, lost earnings and mass job cuts but a huge Chinese economic stimulus plan boosted world stock markets.
Markets in the United States, Asia and Europe enjoyed a buoyant start to the trading week after China and Australia became the latest economic powers to unveil measures aimed at cushioning the impact of the worldwide turmoil.
But evidence of the downturn also abounded as US president-elect Barack Obama prepared for talks on the global financial crisis with outgoing George W. Bush amid fresh gloomy news.
The US government announced a dramatic boost to an aid package for insurer American International Group (NYSE: AIG - news) (AIG), taking the total to more than 150 billion dollars.
The bailed-out US mortgage finance giant Fannie Mae (NYSE: FNM - news) said it lost nearly 29 billion dollars in the third quarter and US electronics retailer Circuit City filed for bankruptcy protection.
Thousands more job cuts loomed meanwhile as German logistics giant Deutsche Post (Xetra: 555200 - news) said it would cut 9,600 posts as part of restructuring of the loss-making DHL express mail delivery activities in the United States.
Figures showing industrial production in France falling by 0.5 percent in a month and Japan's core machinery orders plunging at the fastest pace in a decade.
Despite the news, stock markets took some comfort from the Chinese stimulus plan, which calls for tax cuts and increased spending corresponding to about seven percent of China's gross domestic product over the next two years.
US stocks rallied in opening trade as investors welcomed the whopping 586-billion-dollar stimulus package and the enlarged US government bailout for insurer AIG.
The Dow Jones Industrial Average jumped 1.92 percent to 9,115.85 points in opening trade and the tech-heavy Nasdaq (NASDAQ: news) advanced 1.58 percent to 1,673.44 points.
In Europe, London closed 0.89 percent higher, Paris closed up 1.06 percent and Frankfurt 1.76 percent, but they were all easing back from earlier highs.
Chinese share prices had soared to close at 7.27 percent while Tokyo ended 5.8 percent higher and Hong Kong 3.5 percent up.
Analysts said investors had taken heart from the Chinese package and that it would have repercussions far beyond its borders.
Australian Prime Minister Kevin Rudd described it as "an extraordinary fiscal stimulus package" that would boost the world economy.
Rudd himself announced 2.2 billion US dollars of financial assistance for the ailing Australian automotive industry.
The Group of 20 major wealthy and emerging nations had pledged at a meeting on Sunday to take "all necessary steps" to boost sagging market confidence and give a bigger voice to developing countries in global economic affairs.
The meeting aimed to lay the groundwork for a November 15 summit, hosted by Bush, on the financial turmoil.
Elsewhere, there were fresh reminders of the worsening health of the global economy.
Japan's core machinery orders plunged at the fastest pace in a decade in the three months to September as the economy teetered on the verge of recession, official data showed.
The orders, a leading indicator of corporate capital spending, tumbled 10.4 percent from the previous quarter as companies cut back on investment in new plant and equipment in response to the economic slump.
Industrial production in France fell 0.5 percent in September after a drop of 0.4 percent in August as the key auto industry was particularly hard hit, plunging 3.1 percent, the national statistics office said.
Marc Touati of Global Equities estimated that the French economy had already entered recession in the second quarter of this year.
Italian industrial output slumped 2.1 percent in September, the biggest single-month drop for a decade, official data showed on Monday.
Italy's leading bank UniCredit (Milan: UCG.MI - news) said the data meant that recession was now inevitable for Italy.
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