Europe cuts rates as Obama to address global crisis
NEW YORK (Reuters) - Britain and Europe slashed interest rates on Thursday amid recession fears deepened by some of the worst U.S. retail sales in decades and an IMF forecast for an economic contraction not seen since World War Two.
The rate cuts failed to halt the slide of global stock markets amid distressing signs including top automaker Toyota halving its profit forecast and expectations the United States could report another 200,000 job losses on Friday.
"It looks like the financial market crisis that hit us full force in September is starting to have a knock-on effect on Main Street and it's leading corporations to tighten their belts and start to cut staff," said Chris Rupkey, chief financial economist with Bank of Tokyo-Mitsubishi UFJ in New York.
U.S. President-elect Barack Obama, whose election was aided by voters' worries about the sinking economy, was to take his first steps in addressing the global crisis on Friday when he would meet with his top economic advisers.
Obama would then hold his first news conference since Tuesday's election and perhaps answer speculation about who he would name as Treasury secretary. A Reuters poll named New York Fed President Timothy Geithner as the most likely pick.
The Bank of England (BoE) cut rates by a stunning 1.5 points to 3 percent, the lowest level in more than half a century, to combat a slumping housing market, a decline in manufacturing and increased unemployment.
Investors, who had expected a cut of 50 basis points, called the move "astonishing" and "spectacular."
The European Central Bank (ECB), covering 15 European nations, met market expectations by reducing its benchmark interest rate 0.5 percentage point to 3.25 percent.
ECB President Jean-Claude Trichet did not rule out a further cut though some analysts called the half-point reduction disappointing considering that the Bank of England acted so boldly. The U.S. Federal Reserve's benchmark rate stands at 1.0 percent.
The Fed has been so active in propping up the financial system, lending huge sums to bankers and dealers, that its liabilities expanded to a record $2 trillion for the first time this week.
Inflation pressures eased further when oil fell another 7 percent with U.S. crude down around the $61 range versus a record $147 per barrel in July. London Brent Crude fell below $60 and traded around $57.
STOCKS FALL AFTER RATE CUTS
The Dow and the S&P 500 closed about 5 percent lower after European shares fell 5.8 percent and Japanese stocks tumbled 6.5 percent.
Bad news on the corporate and macroeconomic fronts continued. Toyota Motor Corp, the world's biggest automaker, slashed its annual operating profit forecast by more than half, and its shares tumbled more than 10 percent.
Hobbled U.S. automakers were looking for government aid and prepared to lobby U.S. House of Representatives Speaker Nancy Pelosi. [ID:nSP306564] Continued...
The Wall's economic legacy
Twenty years after the fall of the Berlin Wall, much of the East German economy has cast off the shackles of its Communist past. But some of the changes have come at a price. Full Article | Full Coverage
Asia shares slide, Toyota hit
