No relief seen in global economic crisis

By Jackie Frank

WASHINGTON (Reuters) - The global economy saw more signs of distress on Thursday with U.S. stocks plunging for a second consecutive day, oil prices falling, a surprise rate cut in Switzerland, export woes in Japan and rescue loans to Turkey and Iceland.

Wall Street was hostage to the rapidly changing news of a possible rescue for the U.S. auto industry, with the stock market rising on news of a tentative bipartisan deal in Congress for a $25 billion package for Detroit and then falling to new lows when the deal ran into trouble.

Automakers held out hope. After the end of the trading day, the White House announced it could back a compromise plan pushed by Michigan senators to help by using $25 billion in Energy Department loans for greener cars, and urged Congress to act quickly. U.S. automakers said they will meet Democratic demands to offer a plan to return to profitability, and lawmakers said it could be considered the week of December 8.

In more bad news for the battered U.S. economy, the number of U.S. workers on jobless rolls surged to the highest in a quarter century, prompting Congress to extend benefits for the long-term unemployed. Oil prices plummeted below $50 a barrel for the first time since 2005 as investors anticipate a long global recession will slash demand.

"I think this is going to be not only a deep recession, at least in the next couple of quarters, but also a long recession," said Conrad DeQuadros, senior economist at RDQ Economics in New York.

All three major U.S. stock indices made broad swings, ending lower due to deepening economic fears and investor's movement away from risk. The Standard & Poor's 500 was down more than 6.71 percent, its lowest since 1997. The Dow Jones industrial average slid nearly six percent to close just above 7,500 and the Nasdaq Composite Index fell more than five percent.

World stocks tumbled to 5-1/2-year lows with volatile emerging market equities down 4.71 percent. European shares closed down 3.7 and Japanese stocks plunged nearly 7 percent.

Investors sought shelter in safe assets, and the U.S. dollar slumped versus the yen, but both rose against the euro.

The rapidly slowing world economy prompted Switzerland's central bank to make a surprise one percentage-point interest rate cut, its third in six weeks and largest since it adopted its current system in 2000.

Analysts said the weak U.S. labor market almost guaranteed a Federal Reserve Board rate cut from the current 1 percent at its next meeting on December 15-16.

Despite reports that Saudi Prince Alwaleed bin Talal planned to boost his stake in Citigroup back to 5 percent, shares in the U.S. financial giant fell 26 percent to 1994 levels due to serious concern over its very survival.

"How many times is one going to take a beating before realizing the market isn't going to bounce?" said Andrew Kanaly, chairman of Kanaly Trust Company in Houston, Texas. "The decline in the oil prices is a barometer of more economic sliding globally."

In what would normally be a good sign for consumers but now signals weaker global growth, U.S. crude futures plunged nearly 9 percent to $48.85 a barrel to a 3-1/2 year low on expectations that a stalling economy would mean falling demand.

JOB LOSSES, LONG DOWNTURN

A government report showed the number of workers filing new claims for jobless benefits last week surged to the highest in 16 years. More than 4 million Americans were receiving jobless benefits in the week ended November 8, the highest since 1982.