Job cuts, auto woes deepen global recession fears

By Patricia Zengerle

WASHINGTON (Reuters) - Bleak outlooks from world carmakers and more news of big job cuts at major companies on Thursday deepened fears in corporate boardrooms and trading floors around the world of an extended global recession.

Asian shares tumbled, hit by weaker-than-expected Japanese export data, European stocks closed slightly lower as losses in banks and automobiles eclipsed gains in oil and defensive shares, and emerging markets were pounded again.

But after hitting a five-year low on Wednesday, U.S. stocks rebounded, with a bounce in energy and health-care stocks leading the Dow Jones Industrial Average .DJI> to a gain of more than 2 percent and the S&P 500 .SPX> up more than 1 percent, although the Nasdaq was off 0.73 percent.

The interbank cost of borrowing longer-dated dollars rose for the first time since governments detailed a raft of bank bailout measures, hurt by recession fears.

Former U.S. Federal Reserve Chairman Alan Greenspan told Congress he was "shocked" at the U.S. credit market breakdown and said he sees a jump in unemployment ahead. He also said he was "partially" wrong to resist regulation of some securities.

Despite past concerns that risks were being underestimated, "this crisis, however, has turned out to be much broader than anything I could have imagined," he testified to Congress.

Federal Deposit Insurance Corp Chairman Sheila Bair, a top U.S. banking regulator, said regulators were working with the Bush administration to create a loan guarantee program to ease pressure on homeowners.

She said the government must do more to guarantee mortgage loans to persuade lenders to modify their terms and help ward off foreclosures.

Central banks around the world tried to shield economies from the worst financial crisis since the Great Depression.

Sweden, which joined the U.S. Federal Reserve and others in coordinated cuts two weeks ago, lowered its key interest rate 1/2 percentage point and signaled more to come.

New Zealand cut rates by a record one percentage point and hinted at more reductions, and Bank of England Governor Mervyn King said Britain, too, was ready to lower interest rates again.

The central banks of Brazil, Turkey and Norway acted to boost liquidity, and Canada said the government would guarantee borrowing from banks as its central bank warned it expects the country's economy to be pushed to the edge of a recession.

The International Monetary Fund was hurrying to approve by early November a package that would let some "top-tier" emerging market economies exchange local currencies for dollars to ease strains, officials familiar with the plan said.

So far, Hungary, Iceland, Belarus, Ukraine, Serbia and Pakistan are in talks with the IMF on economic programs, backed by financing. But the IMF denied market speculation it is preparing a $1 trillion aid package.

U.S. workers lined up in unexpectedly large numbers last week to file new claims for jobless benefits and, in another bad sign, JPMorgan Chase & Co. said U.S. commercial real estate values may drop up to 30 percent from their peaks as financing options are pinched by the credit crunch and lenders demand higher returns.