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UK retailer's sales, Taiwan exports plunge in crisis

Britain's biggest clothing retailer reported its worst sales in a decade on Wednesday and Taiwan said its exports plunged the most on record, grim news belying recent optimism in world markets of a revival in the global economy.

Despite a stream of gloomy company news, investor appetite for riskier assets such as shares has improved on hopes a wide array of government stimulus packages and the cheap, ample supply of money from central banks will finally pay off later this year.

Reflecting the stronger risk appetite, MSCI's All Country World index rose 0.6%, up for the 10th straight session and heading for its longest winning streak in five years.

“Obviously market sentiment is improving despite the fundamentals of the global economy remaining weak,” said Karen Lin, a fund manager of Paradigm Asset Management in Taiwan.

“This round of rebound is based on ample liquidity in the market, and it might continue the strong upward momentum if Wall Street doesn't return to its volatile movement seen last year.”

But news from British retailer Marks & Spencer painted a different picture.

It said was looking to close 27 stores and cut more than 1,200 jobs to offset its worst quarterly sales performance for a decade.

The 125-year-old clothing, food and homewares group said like-for-like sales in the UK dropped 7.1% in the 13 weeks to December 27, the third quarter of its financial year.

The company offered a bleak outlook.

“We expect challenging economic conditions to continue for at least the next 12 months,” said Stuart Rose, chairman of the company that serves 21 million Britons a week from more than 600 stores.

In Taiwan, a major supplier in the world's technology chain whose biggest customers are China and the United States, said its exports in December dropped 42% from a year earlier - its worst performance on record.

Imports also dropped a surprisingly large 44.6%, pointing to a grim outlook for exports in coming months.

Japan's Mainichi newspaper reported that Japan may consider cash injections for scores of regional banks to boost their capital and encourage lending to help support an economy in recession.

Officials said Tokyo was not currently considering a broad injection of public money, but shares in small Japanese lenders rose anyway reflecting some of the new found risk appetite in markets.

Like Marks & Spencer, other companies are faring poorly too.

Alcoa Inc, the biggest aluminum producer in the United States, said on Tuesday it would cut more than 15,000 jobs and slash aluminum output by 18% as demand shrivels. Also on Tuesday, LyondellBasell, the world's third-largest petrochemical company, filed for bankruptcy protection for its US units.

Top US lender Bank of America, raising cash to weather a dismal market at home, was selling a $2.8 billion chunk of its holding in China Construction Bank on Wednesday, sending shares in the Chinese lender lower.

“The news has been expected but investors will still take it hard because BoA will most definitely sell more,” said Francis Lun, general manager with Fulbright Securities in Hong Kong. “They need the money.”

In Asia, once seen as relatively immune to the problems that originated in the US housing and banking sectors, policy makers are taking steps to prop up their economies.

Indonesia on Wednesday cut interest rates by a larger-than-expected 50 basis points to 8.75% to spur growth in Southeast Asia's largest economy. It said there was room to cut rates further. Thailand's economic ministers are due to meet on Wednesday to discuss the details of a planned stimulus package, previously flagged at $8.6 billion.

Despite investor enthusiasm in recent weeks, there is still little evidence the host of measures introduced by policy makers have made much difference to economies around the world.

China's fixed-asset investment, a key driver of economic growth, may decelerate this year despite an ambitious, $586 billion stimulus plan announce by Beijing, a state think that said on Wednesday.

The US housing, factory and service sectors produced further misery for the world's largest economy in the final two months of 2008, data showed on Tuesday.

Australian retail sale were surprisingly firm in November, but a steep fall in euro zone inflation in December highlighted the risks of stagnation without further aggressive interest rate cuts from the European Central Bank.

Data later on Wednesday is likely to show German jobless numbers rose in December for the first time since 2006 as recession took hold in Europe's largest economy.

And US employment numbers on Friday are expected to show the economy shed half a million jobs in December alone, taking total 2008 job losses to more than 2.4 million. US retailers are also expected to report they took a hit in December despite deep discounts as consumer confidence slides and unemployment grows. (Reuters)