Thursday February 12, 01:38 AM
Crisis shakes steel, auto, oil sectors
PARIS (AFP) - Fresh losses and grim forecasts slammed the world's steel, auto and oil sectors on Wednesday after a US bank rescue plan that could cost as much as 2.0 trillion dollars got a sceptical reception.
ArcelorMittal (Amsterdam: NSCNL0001MT7.AS - news) , the world's biggest steel maker, reported a huge loss in the fourth quarter of 2008 following a sharp downturn in the construction and auto industries and said job cuts could exceed a planned total of 9,000.
The International Energy Agency in Paris again cut its forecast for global oil demand, saying the decline for 2009 would be the biggest since 1982.
And French carmaker Peugeot Citroen said it would shed more than 11,000 jobs this year and slash output by 20 percent after reporting a net loss in 2008.
"We have a collapse in industrial output, production halted in a number of factories, a stabilisation of consumption and probably a drop in exports," French Finance Minister Christine Lagarde said in televised comments.
The Bank (NASDAQ: TBHS - news) of England said the recession-hit British economy was set to shrink by up to 6.0 percent in the middle of 2009 from the level 12 months earlier, returning to growth only in early 2010.
In Switzerland, Credit Suisse posted its biggest ever shortfall of 7.1 billion dollars (5.5 billion euros) in 2008, saying "intensified" market disruption in the last quarter of the year had hit its investment banking unit.
South Africa's Finance Minister Trevor Manuel said the country's economic growth was set to plunge to a decade-low point of 1.2 percent, with increased social spending likely to balloon a budget deficit.
EU leaders are to hold a crisis summit on March 1 and finance ministers from the Group of Seven top world economies will hold talks from Friday on fighting the downturn, amid pressure to avoid protectionist measures for industry.
The latest batch of grim corporate results came as markets reacted nervously to new huge support for the US banking system and to the approval of a massive stimulus package by the US Senate.
Emmanuel Ng, a currency economist with OCBC bank in Singapore, said there was "quite a lot of disappointment" in the US banking rescue measures, adding they "will keep risk aversion fairly evident" in currency markets.
"Traders were disappointed with the lack of details," analysts at Charles Schwab & Co. had said after the measures were unveiled on Tuesday.
"The plan failed to provide clarity on how the government would price the toxic assets the banks hold, which have held back a thaw in the extension of credit."
US Treasury Secretary Timothy Geithner called on Tuesday for a new public-private fund to soak up toxic assets clogging the financial system, for higher consumer lending, limits to home foreclosures and new capital for banks.
Stocks markets reacted negatively to Geithner's plan, which could amount to as much as 2.0 trillion dollars in bank support, but recovered on Wednesday.
Kathy Lien from Global Forex Trading said that investors were "disappointed by the lack of details and are sceptical about the effectiveness of getting the private sector involved" in the banking rescue plan.
Also on Tuesday, US President Barack Obama hailed approval by the Senate of a highly contentious 838-billion-dollar (647-billion-euro) economic stimulus plan and pushed for lawmakers to send him a final bill in days.
But in reaction to a sharp slide in US stocks, he accused Wall Street of wanting an "easy" way out of the crisis, saying in an interview: "What we've tried to do is to apply some of the tough love that's going to be necessary."
US shares saw a modest rebound on Wednesday. The Dow Jones Industrial Average rose 0.47 percent, the Nasdaq (NASDAQ: news) 0.39 percent and the broad-market Standard & Poor's 500 0.51 percent.
Patrick O'Hare at Briefing.com said the market was probably "dazed and confused still about what it thought it was going to hear from Geithner, but didn't, and the attendant implications of continued uncertainty."
European stock markets also rebounded, with the FTSE 100 in London closing 0.50 percent higher and the CAC 40 (Paris: news) index in Paris up 0.23 percent.
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