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Job cuts mount; Pfizer, Barclays reignite optimism
NEW YORK |
NEW YORK (Reuters) - A tidal wave of layoffs washed across the world on Monday, sending tens of thousands of workers into joblessness as the pain of the global recession worsened.
Amid reports of tumbling corporate profits, dire outlooks and a lowered global growth forecast from the International Monetary Fund, companies in Europe and the United States announced they would cut employees in a dramatic effort to reduce costs and keep their businesses afloat.
Despite the corporate gloom, markets rallied on some of Monday's other news: No. 1 drugmaker Pfizer Inc said it would buy rival Wyeth for $68 billion, Barclays said it had no need to raise capital and sales of existing U.S. homes unexpectedly rose 6.5 percent.
"In the midst of a global recession, here is Pfizer, hopefully spending their dollars wisely," said Andre Bakhos, president of Princeton Financial Group in New Brunswick, New Jersey. "It adds a little confidence that all is not lost."
But the darkening view was reinforced by a dismal revised outlook from the IMF, which slashed its forecast for 2009 global growth to 0.5 percent from 2.2 percent in its last economic outlook in November, a source told Reuters.
The IMF saw the U.S. economy contracting 1.6 percent in 2009, with the euro zone shrinking 2 percent and Japan contracting 2.6 percent, according to the source. The IMF pegged 2010 world growth at 3 percent.
The tsunami of layoff announcements, affecting more than 70,000 workers, started in Europe, with electronics maker Philips reporting 6,000 job cuts as it posted a bigger-than-expected 1.5 billion euro ($1.9 billion) loss, its first quarterly loss since 2003.
ING cut 7,000 of its 130,000 jobs, replaced its CEO and got guarantees from the Dutch government as other European banks sought to reassure investors they are coming to grips with the turmoil in financial markets.
Corus, Europe's second-largest steelmaker, said 3,500 jobs would go worldwide, including 2,500 in Britain, as the company, owned by India's Tata Steel, sought to boost operating profit.
CATERPILLAR, SPRINT, HOME DEPOT
In the United States, Caterpillar, the world's largest maker of heavy equipment, said it would eliminate nearly 20,000 jobs, reported a 32 percent drop in profit and forecast the weakest year for business since the end of World War Two.
Sprint Nextel Corp the No. 3 U.S. mobile service provider, said it will cut up to 8,000 jobs, or about 14 percent of its workforce. [ID:nN26368948] Retailer Home Depot Inc said it will cut 7,000 jobs, or about 2 percent of its workforce.
Chip maker Texas Instruments said it was cutting 12 percent of its workforce, including 1,800 layoffs and 1,600 voluntary departures [ID:nN2638388], and car maker General Motors Corp said it would lay off 2,000 more workers at two assembly plants.
On the flip side of Pfizer's deal for Wyeth, Pfizer said it will cut 15 percent of the companies' combined 130,000 workers -- about 19,500 jobs.
Major U.S. indexes rose. The Dow Jones Industrial Average gained 0.5 percent and the broader S&P 500 was up 0.6 percent. Bond prices fell as the increase in existing-home sales raised questions whether the housing market was as weak as thought. European stocks rose, with Europe's FTSE 300 index closing 3.2 percent higher.
Gold climbed above $900 an ounce, the highest in more than three months.
Governments around the world focused on stimulus packages to grapple with the financial crisis.
U.S. President Barack Obama's spokesman, Robert Gibbs, told reporters the president "would do everything in his power to ensure the financial system does not collapse," after a weekend in which Republicans voiced objections to Obama's stimulus proposals.
Obama's choice to help lead the government effort, Treasury Secretary-designate Timothy Geithner, won Senate approval after a delay due to qualms over his underpayment, since rectified, of some personal taxes earlier this decade.
Geithner is expected to be sworn in quickly and within weeks will likely unveil reforms to the $700 billion financial bailout program to provide more support for housing and credit markets and possibly to absorb troubled assets from banks.
Canada will spend C$7 billion ($5.7 billion) on infrastructure over the next two years, a government minister said, and officials said Canada will run budget deficits totaling C$64 billion over the next two years.
"We not only create jobs and economic activity now, we also improve our economic competitiveness for decades to come," said Minister of Transport John Baird.
The Norwegian government presented a $2.87 billion fiscal stimulus package to prevent a surge in unemployment.
In Iceland, however, the government of Prime Minister Geir Haarde collapsed under the pressures of the financial crisis.
Banks have borne the brunt of the credit crisis, which was sparked by mass defaults on U.S. home loans. The sector has seen a wave of consolidation as leading banks around the world have collapsed or been taken over.
But shares in Britain's Barclays leaped 73 percent after it said its projected 2008 pretax profit of more than 5.3 billion pounds ($7.3 billion) would include significant writedowns of 8 billion pounds and that the bank had made a good start to 2009.
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