A look at economic developments around the globe

AP News
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Posted: Dec 08, 2009 2:18 PM

A look at economic developments and activity in major stock markets around the world Tuesday:

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LONDON _ The United States and Britain must take action soon to get their public finances in order if they want to avoid threats to their top triple-A credit ratings, the credit ratings agency Moody's Investors Services said.

In an assessment of eight triple-A-rated countries, Moody's said the public finances in both countries are deteriorating considerably and may therefore "test the Aaa boundaries" in the future.

Both the U.S. and Britain are considered to have "resilient" triple-A ratings, according to Moody's, against the more solid "resistant" top ratings for the others it has assessed in its quarterly report _ Germany, France, Canada, Switzerland, Luxembourg and New Zealand.

However, Moody's said both the U.S and Britain have an "adequate reaction capacity" to rise to the challenge.

European markets fell sharply after the warning. The FTSE 100 index of leading British shares closed down 1.7 percent, while Germany's DAX fell 1.8 percent and the CAC-40 in France was 1.4 percent lower.

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TOKYO _ Japan's government unveiled $81 billion of new stimulus spending to keep the world's second-biggest economy from lurching back into recession.

Despite shrinking tax revenue, Prime Minister Yukio Hatoyama and his Cabinet agreed to 7.2 trillion yen ($80.6 billion) in new spending.

The largesse underlines that the world's biggest economies are still too fragile to get by without government life support even as a recovery from the global recession takes shape. In export-reliant Asia that's partly because demand from Europe and the U.S. is improving only tepidly.

Japan also faces falling prices while big exporters like Toyota Motor Corp. and Sony Corp. are losing record amounts of money as a rising yen adds to their woes.

Stocks were mostly lower in Asian trading. Japan's Nikkei 225 stock average shed 0.3 percent, Hong Kong's Hang Seng dropped 1.2 percent, Shanghai's market lost 1.1 percent while markets in Australia and Taiwan fell about 0.1 percent.

Bucking the downward move, South Korea's key stock measure rose 0.8 percent.

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BERLIN _ German industrial output fell 1.8 percent during October, mainly due to weaker production of machinery and cars.

The fall followed a healthy 3.1 percent increase in September, revised up from an initial estimate of 2.7 percent, the Economy Ministry said. Economists had expected a 1 percent increase in October.

"The trend in industrial production is still clearly upward," the Economy Ministry said.

The data came a day after the ministry reported that German industrial orders declined by 2.1 percent in October, also defying economists' expectations of a rise.

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LONDON _ British manufacturing remains in a deep slump and consumers continue to spend cautiously, underscoring the fragility of Britain's recovery from a deep recession.

Manufacturing output in the United Kingdom was flat in October compared to the previous month, official statisticians said, while the Confederation of British Industry said a fourth of manufacturers polled in a survey expect output to fall over the next three months, more than the 18 percent who expect to step up production.

Consumer spending also showed few signs of vitality _ the British Retail Consortium reported a 1.8 percent rise in retail sales in October, but said that was weaker than expected.

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DUBAI, United Arab Emirates _ Dubai's main stock market plunged for a second consecutive day and an international ratings agency again downgraded six state-linked companies as fresh concerns surfaced about the troubled Arab boomtown's debt woes.

The twin blows came as the sheikdom's finance chief raised new questions about the pace of restructuring at government-owned Dubai World, the debt-saddled conglomerate now at the heart of the emirate's credit mess.

Abdul Rahman al-Saleh, the finance department's director-general, said restructuring the sprawling conglomerate _ which has operations the world over ranging from ports to real estate to tourism _ would take more than six months. He also said the group's property arm Nakheel had received government aid, but that the cash injection was distinct from any state guarantee of debt now owed to banks worldwide.

Lenders until two weeks ago had assumed Dubai's many state-affiliated companies had implicit government backing _ an assumption Dubai officials have since debunked.

Moody's Investors Services cut ratings on government-linked companies it covers. Days earlier, Standard & Poor's also cut to junk status several of the same companies.

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ATHENS, Greece _ Fitch Ratings downgraded Greece's credit rating, citing concern over public finances and doubts that the new government would be able to sufficiently contain the ballooning debt.

In a statement, Fitch said it was cutting Greece's rating from A- to BBB+ _ the worst in the eurozone _ with a negative outlook.

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SHANGHAI _ China extended its lead over the U.S. as the world's biggest auto market in November, with production and sales more than doubling from a year earlier to both surpass 1 million vehicles.

The Shanghai-based China Passenger Car Association, a private research group, reported sales of cars and trucks hit 1.01 million in November, up more than double a year ago, while production doubled to 1.08 million.

Total vehicle sales surpassed 12 million in January-November, with the total for the year likely to exceed a record 13 million, the official Xinhua News Agency reported, citing figures compiled by the Beijing-based China Association of Automobile Manufacturers.

In 2008, sales totaled 9.8 million units.

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BEIJING _ China executed the former manager of a securities company who embezzled millions of dollars _ the first execution of an executive from the communist country's financial sector, state media said.

Some wanted Yang Yanming kept alive so he would explain where the 65 million yuan ($9.5 million) went, news reports said. Yang refused to tell.

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TORONTO _ Canada's central bank held its key interest rate at a record low 0.25 percent and reiterated its expectation that it will keep the rate there until the middle of next year.

The Bank of Canada said that while significant fragility remains, global economic developments have been slightly more positive and the global outlook has improved modestly from the bank's expectation in October.

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PARIS _ Cross-border mergers and acquisitions in major economies fell sharply this year and a plunge in investment will make it harder to emerge from the global financial crisis, said a report by the Organization for Economic Cooperation and Development.

The Paris-based organization said international mergers and acquisitions are expected to decline by 56 percent in 2009 compared with the previous year before.

That is the biggest such decline since 1995, the OECD said. The forecast is based on data up to Nov. 26.

As the financial crisis hit banks and economies around the world, companies across sectors struggled to get credit to fund investment, especially internationally.

Investment by companies in the OECD's 30 rich member countries are forecast to fall 60 percent, from more than $1 trillion last year to $454 billion this year.

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MUMBAI, India _ India's auto sales surged 71.9 percent in November from a year earlier to 207,500 vehicles, thanks to poor sales this time last year and robust consumer spending.

The surge is also a sign of how the Indian consumer _ encouraged by government tax cuts, a big disbursement of back pay for government employees and falling interest rates _ is fueling economic growth in Asia's third-largest economy.

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MOSCOW _ The European Bank for Reconstruction and Development said it will lend euro500 million ($742 million) to Russia's small- and medium-sized businesses, a sector that still has limited access to long-term financing.

The EBRD, owned by 61 countries and partly funded by the U.S. and European Union, uses investments to help develop market economies in formerly communist countries of Eastern Europe and Central Asia.

The EBRD has invested $11 billion in Russia since 1991.