World markets appeared unimpressed Monday with an action plan from international leaders to tackle the global financial crisis, as Japan became the latest major economy to sink into recession.
The Group of 20 rich and emerging nations pledged to work together to restore global growth and overhaul the world’s financial system, but stopped short of announcing specific measures such as coordinated stimulus spending.
”In the midst of an emergency crisis, to have a statement that reads ‘We will cooperate with each another’ is all but meaningless,” said Daisuke Uno, chief strategist at Sumitomo Mitsui Banking.
The leaders vowed to use government spending to reverse a spreading recession, to press for a global trade deal to ward off protectionism and to reform financial regulation and world financial institutions.
Many market players had been hoping for more specific steps to try to prevent the worst financial crisis in decades pushing the global economy into a long and deep recession.
”The G20 statement made promises of future initiatives on global financial regulation and monetary and fiscal stimulus to help global demand, but there was nothing concrete,” noted Barclays Capital analysts.
Asian stock markets were mostly lower in early trade. Stocks fell 0,8% in Hong Kong, 2,6% in Sydney, 1,2% in Seoul and 1,1% in Singapore, although Tokyo managed to eke out a gain of 1,2%.
There was no let up in the flow of bad economic news. Official data showed Japan, the world’s second largest economy, contracted 0,1% in the third quarter, following Germany and Italy in recession.
US president-elect Barack Obama vowed to make fighting a looming recession a top priority with new stimulus spending and help for the auto industry.
He said there was a common understanding that ”we have to do whatever it takes to get this economy moving again”.
”And that we shouldn’t worry about the deficit next year or even the year after. That short term, the most important thing is that we avoid a deepening recession,” he told the CBS television network in an interview.
The yen rose as investors became more risk averse due to the lack of specifics in the G20 action plan.
The dollar fell to ¥96,25 in Tokyo morning trade, down from 97,06 in New York late Friday. The euro slid to $1,2538 from $1,2591 and to ¥120,63 from 122,24.
”The economic spillover of the financial crisis has increased and there is uncertainty about when conditions will stop getting worse,” said Saburo Matsumoto, chief forex strategist at Sumitomo Trust Bank.
Major companies around the world continued to feel the pain from a financial crisis that began with a wave of defaults on US subprime, or risky, mortgages and developed into a full-blown credit crunch and global economic slump.
The parent companies of China Eastern Airlines and China Southern Airlines are expected to each get state aid of three billion yuan ($440-million) to tide them over hard times, state media reported on Monday.
German Chancellor Angela Merkel was due to hold crisis talks with executives at car maker Opel, which has said it needs state guarantees for its bank loans as its US parent company General Motors struggles to stave off bankruptcy.
Oil prices fell in Asia after Opec president Chakib Khelil, the energy minister of Algeria, suggested the cartel is unlikely to reduce output at a meeting later this month, and as the bad economic news continued to pile up.
New York light sweet crude for delivery in December dropped $1,26 to $55,78 a barrel. – Reuters