Economic crisis wipes out corporate profits

Economic crisis wipes out corporate profits
AFP
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First Published: Wed, Feb 04 2009. 10 00 PM IST
Updated: Wed, Feb 04 2009. 10 00 PM IST
London: The economic crisis put business groups on the rack on Wednesday with Time Warner and Panasonic reporting huge losses and top fashion chain investor Baugur filing for bankruptcy protection.
Japan also upped the pressure on US President Barack Obama to withdraw a “Buy American” clause from a massive economic stimulus plan currently making its way through Congress, saying the measure would restrict global trade.
“Protectionism withers the global economy as a whole,” Chief Cabinet Secretary Takeo Kawamura, the government spokesman, told a press conference.
“The prevention of protectionism has been the direction of summit talks up until now. Governments must maintain such a stance,” he said.
And Latvia’s leadership could become the third casualty of the crisis after the Belgian and Icelandic governments fell this year, with ministers now facing a no confidence vote in parliament over their handling of the downturn.
Meanwhile Chinese manufacturing data was reported up for January, leading some analysts to suggest that China might be pulling through the crisis.
“Manufacturing in China is still contracting, but the bottom is now in sight,” said Sherman Chan, an analyst with Moody’s Economy.com.
US bank Merrill Lynch said the new data pointed to “a recovery” in China.
Chinese state media also reported that Chinese banks extended $176 billion (€136 billion ) in new loans in January -- a 50% increase from January 2008 -- under official pressure for loans to support the economy.
There was some encouraging news in Europe too, where business activity in the 16 countries sharing the euro ticked up in January compared to a record low in December although the rise was lower than had been expected.
Asian and European stock markets rallied amid investor hopes for progress on the US stimulus plan and some rare good news on the ailing US housing market.
In late afternoon European trade, Frankfurt rocketed up 3.39%, Paris soared 3.15% and London jumped 1.69%.
The tech-heavy Nasdaq index on Wall Street was also up 1.82% and the Dow Jones Industrial Average rose 0.88% in morning trades in New York.
The euro meanwhile fell against the dollar in European trading on the eve of a keenly-awaited decision on interest rates from the European Central Bank.
Norway cut its key interest rate by a half-point to 2.50% in a bid to kick-start the economy and oil-rich Kazakhstan devalued its currency by 20 % against the US dollar amid a slump in the global price for crude.
Oil prices held firm on Wednesday ahead of a crucial report on the health of crude stockpiles in the United States, the world’s biggest energy consumer.
But any optimistic note for the world economy was obscured as the crisis began to show its full effects on the global corporate results season, with a slew of massive losses and gloomy forecasts for the year ahead.
The Japan’s Panasonic Corporation, maker of electronic equipment, said it expected a net loss of 380 billion yen ($4.2 billion) in the year to March and would cut 15,000 jobs and close 27 factories around the world.
Icelandic retailer Baugur, which holds a majority of classic British toy store Hamleys as well as stakes in high street stores House of Fraser, French Connection and Debenhams, said it had applied for bankruptcy protection.
US media giant Time Warner reported net losses of $13.4 billion in 2008 and French-US telecoms giant Alcatel-Lucent said it lost €3.892 billion last quarter due to “the drastic worsening” of the world economy.
The Japanese Mazda Motor Corp, in which the biggest shareholder is struggling US group Ford, said it now expected a net loss for the year of 13 billion yen ($145 million) instead of a profit of 50 billion yen.
Mitsubishi Motors said it would withdraw from the Dakar Rally because of “the sudden deterioration of the global economy.” Fuji Heavy Industries, owner of the Subaru brand, also announced a nine-month loss of $165 million.
Meanwhile in Australia a massive economic stimulus package hit flat obstruction from the opposition, which said the measures smacked of “panic.”
And in Ireland, the unemployment rate jumped to 9.2% in January from 8.3% in December -- its highest level since January 1998.
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First Published: Wed, Feb 04 2009. 10 00 PM IST