China’s retail sales data on Wednesday pointed to slowing consumption and the World Bank said more countries are seeking its help, as evidence mounted that the rich-world downturn is spreading through emerging economies.
Stock markets and commodity prices fell as gloomy data from major economies and an ever-worsening corporate outlook convinced investors the world was heading into a long, painful downturn.
United States President elect Barack Obama on Tuesday urged the Bush administration to back a second stimulus package for the world’s biggest economy and aid to the stricken car industry.
Corporate profit warnings mounted and General Motors shares fell to levels not seen since World War II.
”Whether it’s economic indicators or company news, it’s just too awful,” said Takashi Ushio, head of the investment strategy division at Marusan Securities in Tokyo.
World Bank president Robert Zoellick warned global trade may drop next year for the first time in more than a quarter of a century as the world-wide credit crisis cuts into trade financing.
”It is our estimate that trade could actually fall, not grow more slowly or have growth fall, but actually fall next year, for the first time since 1982,” Zoellick said in an interview with Reuters ahead of a meeting of world leaders.
Zoellick said the bank expected its lending to increase to $35-billion this year from $13,5-billion last year, adding that countries such as Mexico, Indonesia and Colombia were tapping its contingency financing fund amid worries about access to credit.
Spending cutbacks
Investors are looking to a summit of world leaders in Washington on Saturday for solutions to the worst financial crisis in 80 years.
While the leaders are grasping for a global solution, finance ministers from South Korea, Japan and China will meet on the sidelines and may discuss expanding a regional currency swap aimed at fending off pressure on currencies.
Countries globally have cut interest rates, moved to free up seized money markets and recapitalise banks, at a cost of more than $4-trillion.
The crisis, prompted by huge banking losses as the US housing market collapsed, has now created a broad economic downturn to which even China, with the world’s fastest-growing major economy, is not immune.
China’s sales of retail goods from furniture to cosmetics deteriorated in October, in the starkest evidence yet of spending cutbacks by Chinese consumers.
The headline figure for annual retail sales growth held up well, slowing to 22% from 23,2% in September, but doubts about the reliability of that number were underscored by big drops in the detailed breakdown.
For example, sales of home appliances rose just 0,8% from a year earlier, having jumped close to 20% during the first three quarters of the year.
”Retail sales have been hit by the slowing economy and especially by falling asset prices,” said Li Lihong, senior analyst at CITIC-Kington Securities in Hangzhou.
A Japanese government release showed consumer confidence in the world’s second-biggest economy dropped in October to the lowest level since the survey began in 1982.
It followed data on Tuesday that showed Japan’s exports fell nearly 10% in the first 20 days of October, while British retail sales fell by the biggest amount in more than three year.
But a survey released in Australia on Wednesday showed consumers turned a little less gloomy in November after sharp falls in interest rates and petrol prices.
”Today’s data shows just how hard policy is having to work to support a still-fragile consumer in the face of a very negative news flow of global financial market problems and job security,” said Scott Haslem, chief economist at UBS in Australia.
Profit warnings
Asian shares fell for a second day, with Japan’s Nikkei closing down 1,3% and Hong Kong’s Hang Seng falling 1,9% as investors took fright at dire warnings about the corporate outlook from the United States.
”The worst of the financial crisis may be over, but we now face this problem that we don’t know how much worse the economy will deteriorate and where it will find a floor,” said Koichi Ogawa, a chief portfolio manager at Daiwa SB Investments.
Merrill Lynch chief executive John Thain said the global economy was in a deep slowdown and would not recover quickly, adding the current environment recalled 1929, when Wall Street crashed to spark the Great Depression.
Industrial conglomerate Tyco and diversified US manufacturer Rockwell Automation both warned that fiscal-year profits would be well below Wall Street forecasts.
Copper prices fell to their weakest in almost four years and oil edged lower, after closing below $60 a barrel on Tuesday for the first time since March 2007, on expectations the weakening global economy will curb demand for energy and industrial metals.
”It’s bearish news all around,” said Tobias Merath, head of commodities research at Credit Suisse.”
Even the new set of industrial production numbers due from China and Japan this week should be having a bearish undertone.” – Reuters