Washington: US President Barack Obama urged action on a $900 billion stimulus bill before Congress to stave off “catastrophe”, as a surge in the number of new jobless benefit claims pointed to an economy in deep recession.
Hopes that the Obama administration will make new moves to shore up the battered financial system boosted Asian stocks on Friday, but the prospects of more grim jobs data from the United States later in the day pushed the dollar lower.
In Australia, one of the few developed nations not officially in recession, the central bank, in a major downgrade, predicted the economy would barely grow at all in 2009.
The US Senate was due to resume debate on the stimulus plan on Friday, after abruptly calling a halt to a drive to forge a bipartisan agreement on Thursday night, and Majority Leader Harry Reid said he was “cautiously optimistic” of it passing.
“If we do not move swiftly to sign the American Recovery and Reinvestment Act into law, an economy that is already in crisis will be faced with catastrophe,” Obama said during a meeting with lawmakers from his Democratic Party in Virginia.
A financial crisis that began with a collapse in risky US home loans, devastating the banking sector, has pushed the United States, the euro zone, Britain and Japan into recession.
Central banks worldwide have cut interest rates sharply to stimulate demand after mass layoffs and factory closures, with the Federal Reserve and Bank of Japan pushing rates to near zero in recent months.
In the latest cut, the Bank of England slashed its benchmark rate by half a percentage point to 1.0% on Thursday, the lowest since the central bank was created more than three centuries ago.
Underlining the economic fallout of the crisis, the number of Americans filing for first-time unemployment benefits last week hit its highest level since late 1982.
Later today, the US government’s payroll report, the most comprehensive data on unemployment, may show the economy shed as many as 525,000 jobs in January.
Bank of Japan Governor Masaaki Shirakawa also acknowledged the pressures on the world’s second-biggest economy, saying on Friday that the last three months had seen exports falling rapidly and corporate financing conditions tightening.
Although not in recession, the Reserve Bank of Australia said on Friday the Australian economy would barely grow in 2009 with a rise in gross domestic product of just 0.5%. That marks a sharp cut from 1.75% predicted in November.
It said unemployment was likely to rise significantly from the current 4.5% level, which is well below the 6.5% average for the 30-nation Organisation for Economic Co-operation and Development.
The financial crisis, the most severe since the 1930s, has hammered corporate profits, with Rupert Murdoch’s News Corp the latest firm to report a big loss as it took an $8.4 billion writedown on the value of its Dow Jones acquisition, broadcasting licences and other assets.
Toyota Motor Corp, the world’s biggest auto maker, is due to report quarterly results later on Friday in which it is expected to flag much heavier full-year losses than it forecast just six weeks ago.
Ahead of the results, Moody’s Investors cut its credit rating on Toyota for the first time in a decade by one notch, affecting $19 billion in long-term debt.
Despite the corporate pain, Asian stocks rose for a fourth day on Friday. Japan’s Nikkei rose 1.4%, as investors focused on the US stimulus package and other efforts to cleanse financial institutions of toxic assets.
The Obama administration is due to announce its bank rescue plan next week.