Japan, emerging markets and banks in crisis firing line
Written on November 11, 2008
Economic gloom swept through Japan and several emerging nations on Monday, and European banks bore the scars of the worst financial crisis since the 1930s.
Rating agency Fitch cut Romania’s credit rating to “junk” status in one of four emerging market downgrades and said the global financial crisis had put the ratings of South Korea, South Africa, Russia and Mexico in jeopardy.
Foreign investors have dumped east European assets, fearing that many in the region may not be able to handle large foreign debt burdens.
Several nations, including Iceland, Hungary and Ukraine, have sought help from the International Monetary Fund. Fitch also cut the ratings of Bulgaria, Kazakhstan and Hungary.
In Asia, Japanese manufacturers suffered their biggest quarterly slump in machinery orders in a decade, official data showed, boding ill for capital investment as the economy teeters on the brink of recession.
Even fast-growing China has not proved immune.
Beijing approved a 4 trillion yuan ($586 billion) government spending package to boost domestic demand and help the world’s fourth-largest economy ride out the crisis.
China’s stimulus comes on top of more than $4 trillion in government pledges around the world for bank bailouts, credit guarantees and fiscal spending to contain the damage from the worst financial turmoil in 80 years pay advance in 24 hour.
The United States, where a housing market collapse triggered the crisis, has earmarked $700 billion for bank bailouts.
President-elect Barack Obama is expected to spend hundreds of billions of dollars more in a fiscal stimulus package, once he takes power in January.
Troubled insurer American International Group is poised to become the latest U.S. financial institution to take government money.
Its board is nearing approval of a revised package to replace a previous $85 billion rescue, a person familiar with the matter said. The U.S. Treasury is now expected to buy $40 billion of AIG preferred shares and greatly ease lending terms.
BANKS CAUTIOUS
Jean-Claude Juncker, chairman of the Eurogroup of euro zone finance ministers, said European banks had not resumed lending as much as leaders had hoped when they launched measures to shore up the financial system.
“They are reacting, yes, but they are not reacting with the drive that we were imagining when we had the support plans,” said Juncker, who is also prime minister of Luxembourg.
Filed in: management.