NEW YORK/HONG KONG — Asia-Pacific policy makers scrambled to prepare fresh measures to prevent further economic deterioration next year as investors awaited a report on Friday expected to show the sharpest U.S. job losses in 26 years.
Sharp labour market weakness would add urgency to a bid by executives of the cash-starved U.S. auto industry who are in Washington pleading for a bailout as the industry worldwide feels the impact of the global financial crisis.
Investors have been especially sensitive about the fate of the U.S. automobile industry, the failure of which would hit a chain of parts suppliers and financiers that spans the world.
General Motors Corp and Chrysler LLC told skeptical lawmakers they were open to restarting merger talks to secure aid and prevent job losses.
Australia was also trying to protect its automobile business, pledging $1.3 billion (U.S.) to help car dealers, while a senior Indian government official told Reuters that policymakers were preparing measures on Saturday to boost the auto sector as well as infrastructure building.
Lowering interest rates could also form part of a stimulus package to be announced on Saturday, India's trade minister said.
South Korea repeated promises to do more to boost suffering companies, including the automobile industry, and Indonesia said it has lined up $5-billion in emergency financing for next year if needed.
“Concerns have spread that financial institutions including Japanese ones wouldn't be able to escape unscathed if big U.S. automakers were to go bankrupt,” said Tsuyoshi Segawa, an equity strategist at Shinko Securities in Tokyo. “We have no idea where and what could happen if a huge corporation like them failed.”
U.S. Treasury Secretary Henry Paulson, in Beijing to close the latest round of talks on greater co-operation with China, said the failure of any major U.S. car maker “would be a bad thing.” Washington has long urged Beijing to let its yuan currency rise to help shrink China's huge trade surpluses.
The U.S. economy, in the thick of a year-long recession, probably shed 340,000 jobs in November, according to economists polled by Reuters. The data will be released at 1330 GMT Friday.
Figures on Thursday showed that Americans collecting jobless benefits hit a 26-year high last month. A report on private-sector employers earlier this week showed they cut 250,000 jobs in November, the most in seven years.
Adding to the labour gloom, companies such as U.S. phone company AT&T Inc., Swiss bank Credit Suisse and Japanese brokerage Nomura Holdings Inc. were already cutting their workforce by thousands, bracing for a long and hard global recession.
Ahead of the employment data later on Friday, dealers priced in a 3-in-5 chance the Fed would cut rates by 75 basis points to 0.25 per cent on Dec. 16.
Central banks throughout Europe and Asia have slashed rates aggressively this week, with other more radical actions expected, as policymakers raced to stabilize financial markets and stop deflationary forces from getting further out of control.
The European Central Bank dropped its benchmark rate by 0.75 percentage point to 2.50 per cent, the euro zone's biggest cut ever.
Sweden lopped a record 1.75 percentage points off its policy rate to 2.0 per cent, while the Bank of England chopped rates by 1.0 percentage point to 2.0 per cent, the lowest level since 1951.
British Prime Minister Gordon Brown urged banks on Friday to pass on the cut in the policy rate to help homeowners.
In addition to slashing borrowing costs, central bankers have been considering more direct actions to protect their economies.
The Bank of England is considering buying up government debt and flooding markets with cheap cash to prevent a deeper downturn, an unsourced report from The Daily Telegraph newspaper said.
Wall Street stocks fell Thursday, dragged down by energy companies as oil prices plumbed their lowest since January 2005. However, Asian stocks gained after the massive interest rate cuts around the world emboldened investors to pick up some bargains.
Governments were trying to align their efforts with the deluge of central bank rate cuts and bracing for rough road next year.
Korean officials, who have already announced a raft of measures to counter the global crisis, said more help was on the way to the economy and financial markets, if needed.
“Aggressive counter-measures are required for the automobile, semiconductor and petrochemical sectors due to a rapid decline in export demand, falling export prices, an intensifying global competition and a supply glut,” the Ministry of Knowledge Economy said in a report.
Time was of the essence though, as economic data globally reflected rapidly worsening conditions.
Racked by external financial pressures and a falling currency, Indonesia said it had lined up standby loans for 2009 worth up to $5-billion from Japan, Australia and agencies such as the World Bank.
© The Globe and Mail
