London
05 December 2008
Persistent fears of a deep economic downturn and deteriorating corporate performance are keeping the markets in Europe in a gloomy mode.
Lead by disappointing November U.S. unemployment figures, the European markets finished up the week on a downward note. Oil and banking shares on Friday were among the biggest losers.
The negative mood comes just a day after European central banks slashed interest rates in the hope of stabilizing the markets.
On Thursday, the Bank of England dropped interest rates a full point down to the two percent level.
It is now up to the commercial banks to pass that on to their customers in the form of lower loan and mortgage rates but not all are enthusiastically willing to do that.
British Prime Minister Gordon Brown says he is doing his best to encourage the financial institutions to pass on the cuts.
"We are talking to banks. Remember the last time and interest rates came down 1.5 percent, we had to talk to the banks before things moved forward," he said. "But things did move forward and we will be talking to the banks again."
Philip Booth from the Institute of Economic Affairs says banks in Britain that have been recapitalized by the government are trying to strike a balance between retaining some of those funds while also loosening up lending to help the economy in general.
"The banks are desperate not to make the same mistakes again and at the same time they want to try to rebuild their balance sheets so that the banking market, the markets for savings and lending, can get back to normal again," he said.
In the auto sector, carmaker BMW has announced that November sales were down 26 percent compared to a year ago.
Honda car sales in their key U.S. market meanwhile were down 30 percent last month. And that steep downward trend for the manufacturer has forced it to pull out of the glitzy world of Formula One racing.
Unless a buyer for the Honda team is found by the end of this month, its racing operations in northern England will cease with the loss of over 700 jobs.
Honda's Formula One technical manager Ross Brawn concedes it is a difficult time for his staff.
"It is a great shame because this is a team that was coming together well with a plan that we are on schedule with," he said. "We had three-year plan. This year's results were poor but I would not say that was part of the plan but that was understandable what we were trying to achieve next year and the third year."
Brawn says his number one priority now is to work to keep the team alive by finding a buyer that would secure as many jobs as he can at the Northamptonshire base.
Racing enthusiasts fear that Honda might just be the first of a number of teams that will be forced out of the sport due to the current tough economic times.