It was a choppy day on Wall Street as bargain hunters dipped into the market, only to be outnumbered by pessimists worried about recession. A top US banking regulator said the government must do more to guarantee mortgage loans in order to persuade lenders to modify their terms and help ward off foreclosures.
Sweden and New Zealand responded to the world-wide financial crisis by cutting interest rates. A growing number of countries are looking to the IMF for help, including Iceland, Hungary, Belarus, Pakistan and Ukraine.
More bad US company news showed the breadth of the economic slowdown, which has hit profits from banks to chemical makers, office services companies and hotels. "The market is coming to grips, after being in denial for so long, with a global recession," said Barry Ritholtz, director of equity research at market research firm Fusion IQ in New York.
Japanese exports grew only 1.5 percent in September from a year earlier, well short of forecasts, prompting worries that the world's second-biggest economy is heading into recession and renewing speculation of a rate cut. A dive in car shipments to the United States and slowing demand from emerging economies hurt Japanese exports. Sony Corp slashed its operating profit forecast, citing reduced demand for flat TVs and digital cameras.
Italy's Fiat, Germany's Daimler and South Korea's Hyundai Motor Co added to the gloom among automakers with bleak 2009 forecasts. US carmaker Chrysler LLC said that it was closing one assembly plant early and eliminating a shift at another, resulting in 1,825 job cuts.
General Motors Corp said it was taking steps to preserve its cash, temporarily suspending its company match for its 401(k) retirement savings program and assessing staffing levels. It also said it was planning to make involuntary cuts in its salaried and contract workforce starting later this year. New York-based bank Goldman Sachs Group Inc plans to cut nearly 3,300 jobs, or around 10 percent of staff, a source said.
Former US Federal Reserve Chairman Alan Greenspan said he was "shocked" at the breakdown of US credit markets and that he sees more layoffs and a jump in unemployment ahead.
Despite concerns he had in 2005 that risks were being underestimated, "this crisis, however, has turned out to be much broader than anything I could have imagined," Greenspan said in remarks prepared for delivery to Congress. Federal Deposit Insurance Corp Chairman Sheila Bair said regulators were working with the Bush administration to create a loan guarantee program to ease pressure on homeowners.
RATE CUTS: The dollar and the yen continued to surge. The dollar rose to two-year highs against the euro and a basket of other currencies as recession fears encouraged investors to further cut exposure to risk. The low-yielding yen reached a six-year high against the euro. "It's a fast-moving market, and in general, risk aversion is high," said Tom Levinson, currency strategist at ING.
Sweden, which joined the US Federal Reserve and others in co-ordinated cuts two weeks ago, lowered its key interest rate 1/2 percentage point and signalled more to come.
New Zealand cut rates by a record one percentage point and hinted at more reductions. Bank of England Governor Mervyn King said Britain too was ready to lower interest rates again after warning this week the country was probably entering its first recession in 16 years. The central banks of Brazil, Turkey and Norway acted to boost liquidity and Canada said the government would guarantee borrowing from the nation's banks.
Central banks world-wide are trying to limit the damage from the worst financial crisis since the Great Depression. Economists say the effects of the financial crisis set off by a US housing market collapse 15 months ago are only now starting to be felt by businesses, even as credit flows start to unfreeze as banks begin lending to each other again.
MARKETS STRUGGLE: Asian stocks fell to a four-year low and the FTSEurofirst 300 index trimmed earlier losses to close down 0.5 percent after watching Wall Street rise in morning trading. After US stocks hit a five-year low on Wednesday, investors tried in vain to push the market higher. The Dow and the S&P 500 rose more than 2 percent in the morning before slipping back Among companies posting lower profits were Dow Chemical Co, Xerox Corp and Starwood Hotels, the operator of Sheraton, W and St. Regis brands. Xerox and Starwood also said they would be cutting jobs.
Calpers, the largest US public pension fund, said it may need to tap California public employers for more money if heavy investment losses do not reverse. The interbank cost of borrowing longer-dated dollars rose for the first time since governments detailed a raft of bank bailout measures, hurt by recession fears.