-- EU agrees on 200bn euro stimulus package
-- Japan considers intervention to halt surge of the yen
Japan weighed a currency intervention, Opec debated production cuts and Europe agreed to a 200 billion euro ($268 billion) stimulus while America struggled to navigate the recession with President George W. Bush a lame duck until Barack Obama takes over on January 20. "This is ugly and getting uglier," Peter Kenny, managing director at Knight Equity Management in New Jersey, said on Friday.
"Pick your poison. Do you want to talk about autos, or some of the macroeconomic data we've had coming out or do you want to talk about Madoff? If there's something positive here, share it with me. I see nothing here that is going to give anyone any reason to buy the market."
Bernard Madoff, a quiet force on Wall Street for decades, was arrested and charged late on Thursday on allegations his hedge fund perpetrated a $50 billion fraud, which sent investors scrambling to assess their potential losses.
After Bush failed to persuade senators in his own party to support a $14 billion auto bailout, the White House warned the US economy could not withstand an auto collapse and said it might provide emergency funding from the $700 billion financial bailout fund known as TARP.
That helped Wall Street reverse an early sell-off. The Dow and S&P 500 were higher at midday. The bailout legislation failure prompted concerns that one of the last bastions of the US manufacturing base could be forced into bankruptcy or collapse, jeopardising millions of jobs and having repercussions world-wide. General Motors Corp and Chrysler LLC were seeking billions of dollars in immediate aid to avert collapse, while Ford Motor Co wanted a hefty line of credit.
JAPAN EXPANDS STIMULUS: Tokyo's Nikkei average fell 5.6 percent on the bailout failure, even as Japan expanded a fiscal stimulus plan and bolstered a war chest for bank rescues to $131 billion. But Tokyo kept markets guessing on whether it would intervene to stop a surging yen from pushing the economy deeper into recession. The US dollar, which also got hammered when the Senate refused the auto bailout, trimmed losses once the White House signalled it might use TARP funds to help the auto industry.
"It's true that dollar-yen made new 13-year lows this morning but I don't think there's any sign that the Japanese are going to intervene," said Marc Chandler, global head of currency strategy for Brown Brothers Harriman.
"I'd say that the message from the Bank of Japan governor yesterday before parliament was just that 'we can intervene if we want to,'" Chandler said. European stocks closed down 2.8 percent after European Union leaders sealed the 200 billion-euro stimulus package, which had exposed deep differences between Britain and Germany.
The euro zone clearly needs a boost - data on Friday showed industrial output dived 5.3 percent year-on-year in October. The United States was also hit by troubling indicators when retail sales fell for the fifth-straight month and producer prices dipped 2.2 percent, raising the specter of deflation.
The good news for consumers was falling oil and commodities prices. However, Opec appeared likely to agree to another big production cut when it meets in Algeria next week in the face of shrinking fuel demand and battered oil prices. The issue was how deep that cut should be.
EU leaders sealed an agreement for a 200 billion euro plan designed to dig Europe out of recession and a package to combat global warming on the final day of a crunch summit in Brussels. After persuading Ireland to submit a stalled EU reform treaty to a second referendum next year, the 27 leaders agreed to club together to fund an economic stimulus package and make major cuts in greenhouse gas emissions.
"We are starting to change the way we do things in Europe - talking less and doing more," French President Nicolas Sarkozy, who chaired the summit, told a press conference. Although climate change deal was only sealed after protracted negotiations, leaders said there had been an overwhelming consensus on the need for a joint assault on the economic slowdown.
"Everybody was on the same line about the need for a recovery plan," said Sarkozy. "Exceptional situations need exceptional measures." An eve of summit interview by German Finance Minister Peer Steinbrueck, who ridiculed the idea of "tossing around billions" to fend off recession, had indicated that the rescue package would prove a major bone of contention.
But British Prime Minister Gordon Brown, whose "breathtaking" 20-billion-pound (30 billion dollars) stimulus package was singled out by Steinbrueck, said the agreement was a riposte to those "who say you (should) do nothing". "What Europe has proved unanimously today is that it is ready to act in a united way to deal with the global downturn," Brown told reporters.
"We will continue to reject the do-nothing approach and we will not stand by and let the recession take its course." Under the stimulus plan, member countries would pump on average the equivalent of 1.5 percent of gross domestic product (GDP) into their economies in order to temper the impact of a global recession.
Ahead of the summit, Germany had expressed reservations about ploughing so much public money into the economy and resisted pressure to contribute more than what it judged necessary to get the German economy going again.
Sarkozy also said that there had been unanimous agreement on the need for an "historic" climate package that he said should inspire the rest of the world. "It is quite historic what has happened here," he said. "No continent has given itself such binding rules that we have adopted with unanimity."
The EU's climate-energy package, the "20-20-20" deal, seeks to decrease greenhouse gas emissions by 20 percent by 2020, make 20 percent energy savings and bring renewable energy sources up to 20 percent of total energy use.
Sarkozy denied the targets had not been watered down during the negotiations amid calls by several states for amendments to the initial package at a time of recession.
"The objectives remain the same," said Sarkozy. "No way can the (economic) crisis be used as an excuse not to move on the environment." European Commission president Jose Manuel Barroso said the agreement showed that the 27-nation bloc was serious about tackling global warming.
"These are the most ambitious proposals anywhere in the world," he said. "Europe has today passed its credibility test. We mean business when we talk about climate." Leaders also confirmed they had adopted a deal to pave the way for Ireland to stage a second referendum on a stalled package of key reforms, the Lisbon Treaty which was rejected in June.
Irish Prime Minister Brian Cowen said he was prepared to call a new referendum as long as promised guarantees are delivered. "I have said that I would be prepared to return to the public with a new package and seek their approval of it," Cowen told reporters.
"Today we have the clear evidence the European Union is ready to respond" to the concerns displayed by the Irish people in the June plebiscite, he added. Under the deal, Ireland would try to hold a new referendum by November 2009 in exchange for guarantees on key issues including an assurance that it does not lose its EU commissioner.