Recession fears stalk world markets

Saturday, November 8, 2008 at 4:11 am

Fears of a deep global recession kept world markets under pressure on Friday (Nov 7), as South Korea cut interest rates and the International Monetary Fund warned major economies will contract next year. The IMF called for government spending to battle the financial crisis, which prompted Britain’s central bank to slash its key lending rate by an unprecedented 1.5 percentage points on Thursday (Nov 6).

Tokyo’s Nikkei stock index closed down 3.55 per cent after dropping as much as seven per cent at one point following a profit warning from Toyota. Sydney lost 2.4 per cent. “Despite huge rate cuts in the UK and Europe, the markets continued to fall on continued concerns over the deteriorating global economy,” said Ben Potter, research analyst at IG Markets in Australia.

Hong Kong shares opened sharply lower but managed to rebound to show a gain of 1.4 per cent at midday, while Seoul added 3.9 per cent as the rate cut there cheered investors amid the gloomy economic outlook. The IMF said the downturn in leading economies would be “broadly comparable in magnitude” to recessions in 1975 and 1982, but that recovery “is projected to begin late in 2009.”

In sharp downward revisions to economic projections made less than a month ago, the IMF said advanced economies were now seen shrinking by 0.3 per cent in 2009, instead of the prior estimate of 0.5 per cent growth. It lowered its global economic growth forecast to 2.2 per cent. Investors were also bracing for today’s report on US payrolls for October to show a loss of 200,000 jobs amid weak economic momentum.

(With inputs from agencies)

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Recession fears stalk world markets

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