Global recession fears deepend after lackluster G20

Global economic crisis deepened on Monday when Japan became the latest major country to fall into recession after a Washington summit offered scant short-term hope for action to contain the damage.

A man looks at quotation board flashing share princes of the Tokyo Stock Exchange (TSE) in front of a securities company in Tokyo on November 17, 2008. (AFP Photo)

Markets showed little enthusiasm for a vague pledge on Saturday from Group of 20 leaders to join forces to galvanize growth and overhaul the world's financial architecture.

The G20, grouping developed and developing countries, stopped short of announcing specific steps such as coordinated stimulus spending.

"In the midst of an emergency crisis, to have a statement that reads 'We will cooperate with each another' is all but meaningless," said Daisuke Uno, chief strategist at Sumitomo Mitsui Banking Corp.

"Market sentiment has soured and with all eyes back on the theme of global recession," he said.

Major European stock exchanges fell at the opening of trade following a mixed performance in Asia. The yen strengthened as risk-averse investors, despite news of a Japanese recession, sought shelter in what they saw as a safe currency.

In London the FTSE 100 index was down 0.32 percent, Paris had slid 0.24 percent and Frankfurt 0.21 percent.

Stocks closed down 2.5 percent in Sydney and 0.9 percent in Seoul, while Hong Kong was 0.4 percent lower in late trade. Tokyo managed to eke out a gain of 0.7 percent as investors hunted for bargains.

Chinese share prices closed with a gain of 2.22 percent, led by airlines following reports that two of the nation's biggest carriers could get government aid, dealers said.

The dollar fell to 96.91 yen in Tokyo afternoon trade, down from 97.06 in New York late Friday. The euro dropped to 1.2567 dollars from 1.2591 and to 121.77 yen from 122.24.

"The economic spillover of the financial crisis has increased and there is uncertainty about when conditions will stop getting worse," said Saburo Matsumoto, chief forex strategist at Sumitomo Trust Bank.

"Equities are struggling to rise and traders are reluctant to buy the dollar, euro and other currencies, pushing up the yen," he said.

There was no let-up in the flow of bad economic news. Official data showed Japan, the world's second largest economy, contracted 0.1 percent in the third quarter, following Germany, Italy and Ireland into recession.

"This is not going to be a short or painless recession," warned Noriko Hama, a professor and economist at Doshisha University.

The last time Japan was in recession -- usually defined as two or more consecutive quarters of economic contraction -- was in 2001 after the Internet bubble burst.

The Bank of France predicted Monday that the French economy was likely to contract by 0.5 percent in the last quarter of the year, leaving growth for the year at just 0.9 percent.

France narrowly escaped recession with growth of 0.1 percent in the third quarter after its economy shrank 0.3 percent in the second.

The head of the International Monetary Fund meanwhile told the BBC on Monday that the IMF, which offers credits to cash-strapped countries that agree to strict reforms, would likely need an extra 100 billion dollars to meet appeals for help over the next six months.

"The number of countries having problems at the same time has dramatically increased and they come to the IMF asking for support," IMF Managing Director Dominique Strauss-Kahn said.

"So we need more resources."

Source: AFP

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