Swiss bank UBS said on Wednesday it was cutting a further 8,700 jobs as losses from the global financial crisis mount, while data from the United States to China and Korea gave little hope of an imminent end to the economic slump.
Stocks fell as companies offered grim or vague assessments of the months ahead, raising doubts about the effectiveness of the policy responses so far.
US President Barack Obama said his administration’s economic remedies were starting to work, but surprisingly weak US retail sales data sent Wall Street lower on Tuesday.
“The realities of a still anemic housing market, extremely weak and arguably worsening labor market conditions, and higher credit costs have once again translated into the appalling reality of consumers cutting back,” said Lindsey Piegza, economic analyst at FTN Financial in New York.
In China, which is rolling out its own $585 billion stimulus plan, gross domestic product probably grew at its slowest annual rate on record in the Q1, according to a local media report.
But the quarter-on-quarter growth, estimated by analysts at above 6%, might point to a recovery in the world’s third-largest economy. Official GDP data is due for release on Thursday.
In South Korea, the unemployment rate rose to its highest in about 3- years in March, and analysts said they expected further job losses in the months ahead.
UBS SEES LOSS, CUTS JOBS
Downbeat news from companies around the globe seemed to support the view that profits will suffer and more job cuts will follow before things improve.
UBS said it would post a Q1 loss of nearly CHF 2 billion ($1.74 billion) and cut 8,700 jobs as it struggles to recover from the crisis. Indian outsourcing firm Infosys Technologies Ltd issued a downbeat forecast, saying earnings and margins would fall this year, sending its shares lower.
On Tuesday, Intel Corp beat forecasts with its results and said it believed personal computer sales hit bottom in the first quarter. But the world’s top chipmaker did not give a formal revenue outlook for the current quarter, sending its shares down 4.6% in after-hours trade. And No. 2 US Internet search provider Yahoo Inc is preparing to lay off several hundred workers, a source with knowledge of the situation told Reuters.
Stocks and higher yielding currencies such as the Australian dollar fell as investors cashed in on recent gains and cut their exposure to risky assets. Japan’s Nikkei average fell 1.1%, while MSCI’s measure of stocks elsewhere in the Asia-Pacific region fell 1.4%.
Mounting job losses, a lack of access to credit and a slump in the value of investments have all played havoc with consumer confidence around the globe. Seeking to reassure Americans, President Barack Obama said moves to recapitalize banks, strengthen the housing market and rescue the auto sector were “necessary pieces of the recovery puzzle.”
“And taken together, these actions are starting to generate signs of economic progress,” he said in a speech on the moves taken since he took office. “There is no doubt that times are still tough. By no means are we out of the woods yet.”
US Federal Reserve Chairman Ben Bernanke also said there were hopeful signs, including the latest data on home sales, home-building and consumer spending, as well as sales of new cars. “A leveling out of economic activity is the first step toward recovery,” he said in a speech. But both Bernanke and White House adviser Christina Romer said the economy was still contracting.
Global financial conditions could remain tight for several more years, a top official at Australia’s central bank said. “What happens over the next few years, at least, is highly uncertain,” said Luci Ellis, the head of the Reserve Bank of Australia’s Financial Stability Department, told a conference. “Confidence in the financial system remains fragile.”
Most of the world is experiencing “what has already been a long and severe recession,” making issues of regulatory reform more pressing, another top Federal Reserve official said.
Eric Rosengren, president of the Federal Reserve Bank of Boston, said the current financial crisis highlighted the need for a systemic risk regulator, but a regulator would face “profound challenges” and would need sufficient authority to change financial institutions’ behavior.
Thailand, which has been grappling with political instability as well as the global financial turmoil, may increase borrowing and expand its stimulus package, the finance minister told the Financial Times in an interview. (Reuters)