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China shows recovery signs, US job loss slows

(Agencies)
Updated: 2009-02-05 08:11

But Europe's PMI figures offered a ray of hope. The survey's business expectations index climbed to 46.4 in January from December's near-record low of 42.3, a sign that the worst may be over.

Full Coverage: World Financial Turmoil Related readings: Obama economic plan tops $900b Germany expects worst economic growth since WWII GDP growth slows to 6.8% in Q4 Britain in recession, data confirms

"We are likely to see a significant contraction in GDP in Q1," said Nick Kounis, economist at Fortis. "Still, the pace of contraction should slow relative to Q4, which we think will prove to be the deepest point of the recession."

The euro zone services Purchasing Managers' Index of around 2,000 companies covering banks to cafes rose to 42.2 in January from 42.1 in December. The downturn worsened in Germany and Spain but slowed markedly in France and Italy.

The financial crisis, stemming from a collapse in risky US home loans which devastated the banking sector, has pushed the United States, euro zone, Britain and Japan into recession.

Britain's services sector also slid less sharply than expected last month. Its services PMI posted the highest reading since September, when Lehman Brothers collapsed.

Corporate evidence was less encouraging. Japan's Panasonic Corp, the world's No.1 plasma TV maker, warned it would post an annual loss of $4.2 billion and said it would cut about 15,000 jobs as it grapples with a stronger yen and slowing demand.

Earnings withered at Munich Re in the final three months of last year as the financial crisis intensified but the world's biggest reinsurer forecast improving prices in 2009.

Global economic woes are hurting even wealthy Norway. Its central bank cut its main interest rate by half a percentage point to 2.5 percent on Wednesday.

Increasing Concerns over Russia

Russia has been as hard hit as most with foreign capital fleeing its shores. Ratings agency Fitch downgraded Russia's sovereign debt rating to 'BBB' and said further cuts were possible.

"The downgrade reflects the negative impact on Russia from the fall in commodity prices and the dislocation to global capital markets that has left Russian banks and companies struggling to refinance external debt," said Edward Parker, Head of Emerging Europe in Fitch's Sovereigns team.

The agency also said it was concerned by the depletion of Russia's reserves, which have shrunk by a third, or around $200 billion, since August as Moscow sought to control a slide in the rouble and compensate for record capital outflows.

The cut brought Fitch in line with rival Standard and Poor's, which cut Russia to two notches above a "junk" rating in December. But analysts were worried about the wider region.

"Increasing concerns over Russia and central Europe must be watched very closely. A slowdown in that region has negative implications for European banks," said Ian Stannard of BNP Paribas.

Some western European banks have lent heavily into the region and Russia had been a big buyer of euro zone exports when oil prices were high.

 

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