* Germany says it is in recession
* OECD cuts forecasts for US, Japan, euro zone
* China industrial output worst since October 2001
* US posts record monthly deficit
* Wall St goes on a buying spree, Dow up 6.7 pct
(For more on the financial crisis, click [nCRISIS]
By Patrick Fitzgibbons
NEW YORK Three of the world's largest economies
painted bleak pictures of current conditions on Thursday as the
United States, China and Germany all provided fresh evidence of
the global economic slide.
Adding to the overall gloom, the Organization for Economic
Cooperation and Development (OECD) cut its economic output
forecasts for the United States, Japan and euro zone, seeing a
tumble into recession for all three. [nLD41617]
The worst financial crisis in 80 years, which rippled
around the world following the collapse of the U.S. housing
market, is taking a heavy toll.
Germany said its economy, Europe's largest, contracted by
0.5 percent in the third quarter, putting it in recession for
the first time in five years. [nLD496344]
The decline -- much sharper than the 0.2 percent forecast
-- was accentuated by German export growth grinding to a halt.
"We are going to have to face up to a very difficult and
long-lasting economic crisis," Germany's deputy economy
minister, Walther Otremba, told Reuters.
Analysts agreed with that grim forecast.
"The headwinds of the financial crisis and the global
economic slowdown are blowing right in the face of the German
economy," said Carsten Brzeski of ING Financial Markets.
In the United States, the already bleak employment picture
looked gloomier when initial claims for unemployment insurance,
a weekly indicator, moved to 516,000 in the week ended Nov. 1.
The worse-than-expected number was the grimmest since the
weeks following the attacks of Sept. 11, 2001. [nN13350262]
"We no longer have hurricanes or other special factors to
blame for elevated numbers as we did, say, in September," said
Dana Saporta, analyst at Dresdner Kleinwort. "So the higher
level we are seeing is probably reflecting a fundamental
weakening in the labor market."
The United States also said it started off its fiscal year
with a record -- and unexpectedly high -- budget deficit of
$237.18 billion in October as financial bailout costs piled up.
In October 2007, the deficit was $56.84 billion. [nN13533571]
In China, which has unveiled a 4 trillion yuan ($586
billion) stimulus package, annual industrial output growth
slowed to 8.2 percent in October, the weakest since October
2001, as manufacturers scaled back production. [nPEK238120]
In global company news:
* British telecommunications company BT Group (BT.L) said
it was cutting 10,000 jobs at home and overseas. [nLC728011]
* Intel Corp (INTC.O) cut its fourth-quarter revenue
estimate on weak global demand. [nN12310791]
* Goldman Sachs (GS.N) suspended its rating on General
Motors Co (GM.N) and said the automaker needs at least $22
billion in federal aid to survive. [nN13354545]
Still, U.S. stocks ended sharply higher on Thursday on
widespread bargain-hunting after three down days in a row. The
Dow Jones industrial average rose more than 550 points, or 6.7
After a series of big rate cuts by central banks, the OECD
said it was time for more governments to provide an extra boost
to their economies by way of fiscal stimulus in the form of tax
cuts or increased government spending.
U.S. President-elect Barack Obama is advocating a second
U.S. fiscal package and help for American carmakers, Japanese
politicians are debating the details of a pump-priming plan and
the British government is expected to follow suit in its
pre-budget report later this month.
Obama, who will take office in January, is also considering
appointing an auto czar when he takes office, according to an
Leaders of the G20 industrialized and emerging nations will
gather in Washington on Friday to discuss the crisis with
investors hoping for concrete policy action.
Japan is prepared to offer foreign reserves worth up to
$100 billion to the International Monetary Fund if the
Washington-based lender needs extra funds to help emerging
economies, a government source said on Thursday. [nT198541]
The summit falls at an awkward time politically as U.S.
President George W. Bush prepares to leave office. He traveled
to Wall Street on Thursday to outline his views on the
financial markets. [nN12305303]
Bush defended the free market system, but acknowledged
there should be some reforms to correct the problems that led
to the global financial crisis.
"While reforms in the financial sector are essential, the
long-term solution to today's problems is sustained economic
growth," the president said. [nN13546369]
While Bush was in New York, the U.S. Congress pressed some
in the financial community about the current state of the
Some of the world's richest and most powerful hedge fund
managers said they support greater transparency for the
secretive industry, but offered divergent views on whether the
industry contributed to the financial crisis.
George Soros, chairman of Soros Fund Management, said hedge
funds were an integral part of the financial market bubble that
has now burst.
"A deep recession is now inevitable and the possibility of
a depression cannot be ruled out," Soros said at a U.S. House
Oversight and Government Reform Committee hearing.
John Paulson, Philip Falcone, James Simons and Kenneth
Griffin also testified. [nN13361337]
The price of oil CLc1 hit a 22-month low at $55 a barrel
on worries that a recession will curb demand before bouncing
back. Stocks in Europe .FTEU3 ended down 0.4 percent, the
third successive day of losses.
Banks warned of tough times ahead.
* Mizuho Financial Group (8411.T), Japan's No. 2 bank, said
it plans to raise up to $3.1 billion after unveiling a $402
million quarterly loss. [nLD555600]
* JPMorgan Chase & Co (JPM.N) could face $1.6 billion-$1.7
billion of writedowns in the fourth quarter, according to
analysts who cover the bank. [nBNG387765]
* Bank of Ireland (BKIR.I) said profits fell by a third and
it canceled its cash dividend. [nLD128258]
* Shares of Commonwealth Bank of Australia (CBA.AX) hit a
four-year low after it warned investors to expect a big jump in
bad debt. [nSYD363142]
(Reporting by Reuters bureaus worldwide; Additional writing
by Keith Weir, Tony Munroe and Yoko Nishikawa; Editing by Brian
Moss, Steve Orlofsky, Gary Hill)