By Mike Peacock
LONDON, Nov 11 (Reuters) - Weak economic readings from China, Japan and
Britain and a grim corporate outlook worldwide reinforced fears on Tuesday of a
prolonged recession, prompting investors to look to a world leaders' summit for
solutions.
Chinese import growth slowed in October and inflation fell to a 17-month
low as domestic demand cooled, raising the likelihood Beijing will cut interest
rates soon to back up the government's new economic stimulus plan.
In Japan, exports fell nearly 10 percent in the first 20 days of October,
corporate bankruptcies jumped 13.4 percent year-on-year and sentiment in its
service sector hit an all-time low, all signs the world's second biggest economy
was teetering on the brink of recession.
German analyst and investor sentiment about the outlook for Europe's
largest economy improved but remained gloomy with the nation probably already in
recession.
The ZEW survey, which measures the ratio of optimists to pessimists, rose
but still read -53.5, reflecting a large preponderance of the latter.
British retail sales fell by the biggest amount in more than three years
last month, and a housing industry survey showed home sales slumped to their
lowest level in at least 30 years.
"These are seriously poor numbers, especially in the run-up to
Christmas," Stephen Robertson, director general of the British Retail
Consortium, said of the sales data.
SUMMITRY
The worst financial crisis in 80 years, prompted by huge banking losses
in the U.S. housing market, has now fostered a broad economic downturn, with
even fast-growing China proving not to be immune.
Investors are looking to a summit of world leaders in Washington on
Saturday for new solutions, following moves worldwide to cut interest rates,
kickstart money markets and recapitalise banks, at a cost of more than $4
trillion.
"We need monetary and fiscal policy coordination across the world ... a
broad, concerted economic response is now urgent," British Prime Minister Gordon
Brown told a news conference. "The second priority is that we agree a timetable
for measures that will clean up the failings in our banking system."
But officials are downplaying the likelihood of dramatic measures and
aides to U.S. President-elect Barack Obama -- who world leaders have urged to
make the credit crisis his number one priority -- said he would not attend the
Nov. 15 summit.
Many in Europe want a root-and-branch reform of financial regulation but
others have sounded more reluctant.
The EU's top trade official, however, said a growth-boosting deal on the
Doha round of trade talks could be struck within weeks and the summit should
fall fully behind it.
"It's very important that the G20 meeting in Washington on 15 November
sends a clear signal to negotiators to achieve this objective," European Trade
Commissioner Catherine Ashton said after meeting her U.S. counterpart Susan
Schwab.
A European Commission statement quoted Schwab as saying world powers must
seek "an ambitious and balanced Doha round that creates new trade flows and
generates economic opportunities worldwide".
Brown said there could be no retreat into protectionism and that he was
confident Obama shared that view.
On the home front, Obama is expected to spend hundreds of billions of
dollars in a fiscal stimulus package, once he takes power in January.
Separately, the regulator for Fannie Mae and Freddie Mac, which guarantee
nearly half of all U.S. residential mortgages, will announce on Tuesday new
steps to mitigate home loan foreclosures, according to sources familiar with the
plans.
CORPORATE PAIN
Inevitably, companies are not escaping unscathed.
Vodafone, the world's largest mobile phone company by revenues, cut its
full-year revenue outlook for the second time in four months but said it would
maintain profits by cutting 1 billion pounds ($1.58 billion) of costs.
Samsung Securities Co, South Korea's biggest brokerage, reported a 69
percent fall in quarterly net profit on the back of falling financial markets.
The world's largest hotelier, InterContinental Hotels , posted a 14
percent rise in third-quarter profits but said it saw a sharp deterioration in
October market conditions.
Japan's Nikkei and European stocks shed 3 percent and U.S. stock futures
pointed to a weak start on Wall Street in response to the worsening corporate
outlook.
Monday's optimism, sparked by China's nearly $600 billion stimulus
package, quickly evaporated.
"Worrying corporate news from the U.S. plus suggestions that the
recession will be longer and deeper than previously thought are adding to the
downside," Matt Buckland, dealer at CMC Markets, wrote in a note.
Deutsche Bank said the equity value of General Motors was now zero,
sending its stock to a 62-year low, and analysts said Goldman Sachs could post
its first quarterly loss.
U.S. electronics seller Circuit City filed for bankruptcy and coffee
chain Starbucks' profits tumbled.
(editing by Elizabeth Piper) ($1=.6334 Pound) Keywords: FINANCIAL/
(email: mike.peacock@thomsonreuters.com; Reuters Messaging:
mike.peacock.reuters.com@reuters.net: +44 207 542 3784)
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