A LOOK AT ECONOMIC DEVELOPMENTS AROUND THE GLOBE

Forbes
March 1 2009

A look at economic developments and stock market activity around the
world Tuesday:

LONDON – The Bank of England could start buying assets from banks
with newly created money as early as this week to boost lending in the
economy, Treasury chief Alistair Darling said in an interview with a
British newspaper. He strongly hinted that the bank’s monetary policy
committee could begin so-called quantitative easing later this week
when it meets for its monthly meeting to decide the level of interest
rates. Meanwhile, the British government pledged funds to rescue 13
billion pounds ($18.4 billion) worth of key public infrastructure
projects being built by private companies that are at risk of collapse
because of the economic downturn. The deal could cost the government
up to 2 billion pounds ($2.8 billion). In markets, the FTSE 100 index
closed down 113.74 points, or 3.1 percent, at 3,512.09, its lowest
close since March 2003.

TOKYO – Toyota’s financing unit is in talks with a Japanese
government-backed bank on possible lending, the automaker
said, underlining the serious woes facing the car industry amid
plunging global sales. Toyota Motor Corp. said no details had been
decided. Japan’s Nikkei flirted with 26-year lows, ending 50.43 points,
or 0.7 percent, lower at 7,229.72, while Hong Kong’s Hang Seng index
closed down 283.58 points, or 2.3 percent, at 12,033.88. Markets in
India, Singapore, and Malaysia also lost ground.

BRUSSELS – The European Union’s top economy official, Joaquin Almunia,
said that the 16 euro nations have a solution to rescue any member that
risks economic collapse, but it would not be clever to give out details
in public. Investors see a risk that euro-zone nations like Ireland,
Spain, Portugal, Greece and Italy could default on debt payments and
are charging them more to borrow on government bonds. Almunia said
this solution would kick in before a member nation needed to approach
the International Monetary Fund for a bailout.

TORONTO – Canada’s central bank cut its interest rate by one-half
point to 0.5 percent – the lowest in history. The Bank of Canada
urged other countries to implement timely and ambitious plans to
address toxic assets and recapitalize financial institutions. The
central bank said those plans are a precondition for stabilization
and recovery. It added that potential delays could mean no recovery
until early 2010. The bank previously predicted growth in the second
half of 2009. The latest interest rate cut means the bank has cut 4
percentage points off the overnight rate since it began the current
easing policy in December 2007.

PARIS – The French prime minister warned of a "long, hard crisis" in
the economy, which he predicted will shrink as much as 1.5 percent
this year as the number of unemployed swells. Francois Fillon also
cautioned that the government’s budget deficit as a percentage of
economic output will soar to slightly more than 5 percent. France
is likely to see unemployment rolls jump by 300,000 people this
year, while the national deficit grows by 50 billion euros ($63
billion), he said. The CAC-40 ended 26.91 points, or 1 percent,
lower at 2,554.55, while Germany’s DAX closed down 19.35 points,
or 0.5 percent, at 3,690.72.

GUANGZHOU, China – A major U.S. business group said an annual survey of
its members shows that companies plan to invest 40 percent less this
year in southern China – a once-booming export region already reeling
from a plunge in orders amid the global financial crisis. Although
thousands of Chinese factories have collapsed in the region in the past
year, the 551 companies polled by the American Chamber of Commerce in
South China had no plans to shut down, the group’s president, Harley
Seyedin, told reporters. Meanwhile, Chinese shares were mixed while
investors waited to see whether this week’s meeting of the national
legislature produces new industrial stimulus plans. The benchmark
Shanghai Composite Index dropped 22.02 points, or 1.1 percent, to
close at 2071.43.

SYDNEY – Australia’s central bank left its key interest rate
unchanged at 3.25 percent after deep cuts in the past few months to
help stimulate the rapidly slowing economy. The board of the Reserve
Bank of Australia decided to end the run of cuts – for now – that have
slashed the key rate from 7.25 percent at the beginning of September
to its lowest level in more than 40 years. Analysts said the bank
was leaving itself room to resume slashing rates if the economy did
not respond well enough to the earlier cuts and to two big government
stimulus packages since October. The S&P/ASX 200 index slid 1 percent
to 3,219.20.

YEREVAN, Armenia – The financial crisis has forced Armenia to let
its currency fall and seek a bailout from the IMF, the Central Bank
acknowledged, with an announcement that it will give up its defense of
the dram currency and return to a free float policy. The devaluation
of the national currency is likely to hurt ordinary Armenians, with
prices for imported goods expected to rise sharply. Several hours
after the bank announced the move, IMF Managing Director Dominique
Strauss-Kahn recommended its executive board to approve the country’s
request for a $540 million loan.

SEOUL, South Korea – South Korea’s beleaguered currency reversed
course, rising against the dollar amid apparent intervention by foreign
exchange authorities and a rebound in stocks. The won came off 11-year
lows against the greenback after earlier approaching the 1,600-level
for a second day. Currency authorities at the Bank of Korea and the
Ministry of Strategy and Finance as a policy neither confirm nor deny
intervention. They do, however, acknowledge occasional "smoothing
operations" – a euphemism for stepping into the market to prevent sharp
one-way moves. Finance Minister Yoon Jeung-hyun told reporters that the
exchange rate "will not always flow in the same direction," according
to the ministry, though he refrained from commenting on possible
intervention. South Korea’s Kospi gained 0.7 percent to 1,025.57.

MADRID – The number of people filing claims for jobless benefits
in Spain jumped 154,058 in February to a total of 3.48 million, as
companies continued to lay off workers in droves amid the recession,
the Labor Ministry said. The figure is a 4.6 percent rise from the
previous month.