Reading audio
London
16 February 2009
World markets are lower after new figures show Japan's economy is shrinking at a rate not seen for decades and more bad financial news is released in Britain.
In Japan, a fourth-quarter economic contraction of 3.3 percent rattled the markets.
For the year, the world's second-largest economy shrank by 12.7 percent, which is a much steeper decline than is being seen in either the United States or Europe.
Reinforcing the point, Japan's Economic Minister said his country faces its worst economic crisis since the end of World War II.
The Tokyo market finished four-tenths of a percent down on the day while Hong Kong finished seven-tenths off.
In Europe, financial stocks again dragged the markets down.
In London, all eyes were on the Lloyds Banking Group. Much larger than expected losses at Halifax-Bank of Scotland or HBOS, which Lloyds recently acquired, sent jitters through the market.
London market analyst Richard Hunter says depending on how things go, some sense that Lloyds may need additional taxpayer backing further down the recessionary road.
"A lot of the sting was taken out on Friday, obviously, with that 32 percent drop. There are indeed concerns around nationalization. There are further concerns as well," Hunter noted. "We are of course getting into a state of the recession where credit write-downs will become less of an issue, but normal write-downs, if you like, as people will start defaulting on loans will become more of an issue."
Adding to the gloom, a new report by the Confederation of British Industry shows that this is going to be a rough one economically in Britain with unemployment heading up.
"The slowdown in the economy, much faster than anticipated means that tax revenues will be way down, like 50 billion [Pounds] over the next couple of years and benefits will rise as unemployment increases," said CBI Director-General, Richard Lambert.
"So it looks as though we are talking about government borrowing over the next couple of years being, getting on for a 100 billion more than the Chancellor hoped for last time around."
Also adding to the depressed mood Monday, some investors reacted with disappointment after finance chiefs from the Group of Seven industrialized countries failed to produce any concrete measures at their meeting this weekend in Rome.
Category