More job losses darken global economic outlook

News of fresh job cuts worldwide and a strong jump in US unemployment darkened the global economic outlook and sent financial markets into convulsions.

In the United States, initial claims for unemployment benefits shot up to a 16-year high last week as the world's largest economy appeared to be sliding into a deep recession.

Lawmakers in Washington, meanwhile, delayed action on a bailout deal for the crippled US auto industry, heightening fears over the survival of the Big Three manufacturers.

Senate Majority leader Harry Reid said it was a "sad reality" there was not yet sufficient support for a rescue plan to pass, and said a measure could be reconsidered in December.

"The executives of the auto companies have not been able to convince the Congress or the American people that this government bailout will be its last," Reid told reporters.

Global markets suffered heavy losses as the grim news piled up, with more job losses announced by automakers and other companies.

Wall Street's main broad-market indicator sank to an 11-1/2-year low as investors made a frenzied rush for the bond market, sending yields to all-time lows.

The Dow Jones Industrial Average sank to a fresh five-and-a-half year low, losing 5.56 percent. The Nasdaq lost 5.07 percent for its lowest close since 2003 and the broad Standard & Poor's 500 plummeted 6.71 to its weakest finish since April 1997.

Elizabeth Harrow at Schaeffer's Investment Research said the market was pounded by "a seemingly endless barrage of dismal economic news."

London's FTSE 100 stock index fell 3.26 percent to close at 3,874.99. In Frankfurt the DAX lost 3.08 percent to 4,220.20 and the CAC 40 in Paris plunged 3.48 percent to 2,980.42.

"Any remaining confidence in global markets has been well and truly trampled on today as investors throw in the towel," said David Evans, an analyst at

The wider impact of the financial crisis on the auto industry was highlighted when France's PSA Peugeot Citroen announced plans to slash 3,550 jobs and Japanese firms Mazda and Isuzu Motors said they were scrapping a total of 2,700 jobs.

The auto sector plays a strategic role in the French economy and directly or indirectly accounts for one in 10 jobs there.

France's President Nicolas Sarkozy unveiled a 20-billion-euro (25-billion-dollar) investment fund to shore up key French companies hit by the economic crisis and protect them from foreign predators.

The amount was far below the 100 billion euro planned last month when Sarkozy first announced the measure as a French version of a sovereign wealth fund.

In Britain, the Society of Motor Manufacturers and Traders and the Retail Motor Industry Federation called on the government to shield the British auto sector from a credit squeeze through loans and possible guarantees.

Rolls-Royce, the British maker of airplane engines, said it planned to cut up to 2,000 jobs worldwide in 2009. British defense manufacturer BAE Systems said it was cutting 200 jobs as its workload was "tailing off."

And the Anglo-Swedish pharmaceuticals giant AstraZeneca said it would slash 1,400 jobs by 2013 as it shuts factories in Belgium, Spain and Sweden.

In Ottawa, Canadian Prime Minister Stephen Harper said Canada and other major nations are prepared to "do everything necessary" to bolster the global economy.

"Our governments will do everything necessary -- taking financial, monetary and tax measures -- to increase the growth of Canada's and the world's economy," Harper said during parliamentary question period.

A top Chinese official warned the Asian giant was facing serious unemployment problems due to the global economic crisis.

"The employment situation is critical and this impact (of the crisis) is still unfolding," said Yin Weimin, the social security minister.

Yin said the government would provide financial aid to help firms maintain employment, especially in light industry which employs up to 40 million Chinese, as well as tax cuts aimed at helping the textile industry.

Chinese President Hu Jintao however insisted that his country's economic fundamentals remained strong.

Traders work on the floor after the morning bell at the New York Stock Exchange.

"We can overcome these difficulties and manage to maintain fast but stable economic growth," he said while in Lima for a summit of Asia-Pacific leaders .

The 21 Asia-Pacific economies making up half of world commerce warned against protectionism and urged a quick breakthrough in the World Trade Organization negotiations to beat the financial crisis.

Stock markets in Latin America were also down: Buenos Aires stock market's Merval index slipped 864.40 points or 6.58 percent; Chile's Ipsa stock market index was down 2,400.92 points or 3.56 percent; and the Mexican stock market was down 387.68 points or 2.09 percent.

Mexico, which depends heavily on trade with the United States, also saw its currency sink to 14.06 pesos to the US dollar -- a record low.

The Ibovespa stock market in Brazil was closed for a holiday.

In Asia, Hong Kong shares opened 3.9 percent lower, South Korean share prices opened 2.0 percent lower, Chinese share prices dropped 4.40 percent in early trade, and Japan's Nikkei stock index was down 2.22 percent by mid-day Friday, all tracking Wall Street's downward streak spurred by weak US economic data.


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