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Economic crisis deepens in Europe, Asia
2008-11-28
LONDON (AFP) - The global financial crisis took a fresh toll on economies from Asia to Europe on Friday, with Japan and India suffering setbacks and Sweden the latest European nation to fall into recession. Japan slipped deeper into recession with factory output tumbling 3.1 percent and consumer spending dropping 3.8 percent in October, official data showed. The figures were "stunningly bad," said Societe Generale's chief Asia economist, Glenn Maguire. "Japan's industrial activity is set to worsen in the near-term, perhaps by an unprecedented degree, as exports to the US have plunged over the past year," he warned. Rising economic powerhouse India, struggling with extremist attacks in the financial capital Mumbai, said its economic growth slowed to 7.6 percent in the third quarter of 2008 from 7.9 percent in the second. While still a respectable performance at a time when many developed economies are in recession , the slowdown in India highlighted the extent to which the US-born financial crisis has spread around the world. The Russian central bank raised its key refinancing interest rate again to 13 percent from 12 percent on Friday to "lower the level of capital outflows and contain inflationary tendencies." The global economic crisis has prompted investors to pull their cash out of developing economies such as Russia that are still seen harbouring risk, and to transfer it to more established havens. There was also bad news from South Korea, where industrial production fell 2.3 percent in October in a sign that the export-driven economy was slowing faster than expected. Some analysts see little prospect of a recovery in the current climate of fear and gloom over the global economy. US stocks climbed Friday, however, driven by momentum from strong gains this week inspired by a sense that the credit crisis may be easing. In a shortened session after Thursday's Thanksgiving Day holiday, the Dow Jones Industrial Average closed up 1.17 percent. The Nasdaq composite rose 0.23 percent and the Standard & Poor's 500 broad-market index rose 0.96 percent. Andrew Busch at BMO Capital Markets said the attacks in Mumbai underscored the fragile geopolitical situation and initially pressured the market. "The markets appear to be saying that they are worried, but not excessively so," he said. Al Goldman at Wachovia Securities said the market was testing whether selling pressures had been exhausted and if the rally can hold. "We believe the economic news will remain very negative well into 2009," he said. "If the stock market can show cumulative buying despite bad data, the market would be saying it has discounted the economic and credit market problems." European stock exchanges limped ahead, with the London FTSE 100 index gaining 1.46 percent. In Paris the CAC 40 added 0.38 percent while in Frankfurt the Dax rose 0.09 percent. The region continued to feel the fallout from the financial crisis. Britain's Royal Bank of Scotland said the government would end up with a 57.9 percent stake in the bank after a share issue to raise funds to help it cope with the financial crisis. RBS said that ordinary shareholders had agreed to take up only 0.24 percent of the share issue, with the government then taking up the balance, as provided for in its recapitalisation plan for the British banking system. Sweden fell into recession in the third quarter after its economy contracted 0.1 percent for two successive quarters, the national statistics agency (SCB) said on Friday. Sweden joins Ireland, Italy and Germany as European Union members now in recession. In Hungary, Japanese car manufacturer Suzuki said it would lay off 1,200 people at a plant near Budapest. Taiwanese electronics company Foxconn said it would lay off 1,500 workers at two Hungarian plants, the MTI news agency said. Italy 's government said it had adopted measures including tax credits to help families and companies cope with recession. One news report valued the aid at 4.0 billion euros. In Spain , the collapse of the once-booming property sector, which has dragged Europe's fifth-largest economy to the brink of recession, continued. Major developer Habitat filed for creditor protection and its rival Colonial said it risked doing the same. With developed nations focused on efforts to boost their own recession-hit economies, the World Bank urged donors not to abandon poor countries hit by the financial crisis. Developing countries "find themselves at the mercy of a crisis not of their making," World Bank President Robert Zoellick said ahead of a UN development conference this weekend.
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