A Look At Economic Developments Around the World
A look at economic developments, activity in stock markets around the world Tuesday
A look at economic developments and stock-market activity around the world Tuesday:
LONDON -- Lower energy costs helped inflation in Britain fall to a five-month low in November, prompting the Bank of England's chief to suggest interest rates could drop further in the months ahead. The office for National Statistics said the consumer price index (CPI), the government's preferred measure of inflation, was up 4.1 percent in the year to November, less than October's equivalent rate of 4.5 percent and September's peak of 5.2 percent. The consensus in the markets was for inflation to have fallen to around 3.9 percent. Despite the smaller than anticipated drop, the Bank of England's governor Mervyn King remained hopeful inflation will fall back toward the target in the coming months because of lower commodity prices, the recession and the government's recent decision to cut sales taxes. However, he warned that the recent fall in the pound will likely moderate the scale of the decline as it will push up the cost of imported goods. The FTSE 100 index of leading British shares closed up 31.52 points, or 0.7 percent, at 4,309.08.
FRANKFURT, Germany -- German Chancellor Angela Merkel said her government will wait to see whether the new U.S. administration passes another economic stimulus package before considering further measures for Germany in a keynote speech before the Center for European Economic Research in the southwestern German city of Mannheim. Meanwhile, the euro zone economy contracted at a sharper pace in December, a closely watched survey showed Tuesday, suggesting the European Central Bank is likely to cut interest rates again early next year to prevent the economy from sliding deeper into recession. The preliminary estimate of the purchasing managers index (PMI) for the services sector in the 15-nation single currency zone fell to 42.0 in December from 42.5 the previous month, the lowest in the survey's 10-year history. Meanwhile, the equivalent manufacturing PMI slumped to 34.5 in December from 35.6 in November -- also the lowest in the survey's history. The composite reading, which combines both PMIs, dropped to 38.3 from 38.9. Again this was the lowest in the survey's 10-year history. The DAX closed 75.09 points, or 1.6 percent, higher at 4,729.91, while the CAC-40 in France rose 66.00 points, or 2.1 percent, at 3,251.66.
SHANGHAI, China -- China's domestic investment in assets grew by 26.8 percent in the first 11 months of the year over a year earlier, cooling as companies crimped spending on real estate and factories. The January-November figure, released by the National Bureau of Statistics, compared with a 27.2 percent increase in the first 10 months of the year. Stocks opened in the red but bounced back modestly after the head of China's central bank said more rate cuts could be in the offing. Shanghai's key index rose 0.5 percent to 1,975.01.
ROME -- Fiat Group SpA has for the first time shut down most of its Italian plants for a month, laying off nearly 50,000 workers for an extended holiday as it copes with the precipitous drop in demand for new cars. The shutdowns through mid-January affect 14 of Fiat's 20 Italian plants, and 48,000 blue collar workers out of its nearly 80,000-strong Italian work force. Under the temporary layoff scheme, part of the workers' salaries are paid by a government-administered fund that includes industry contributions. Italy's MIB 30 index finished up 1.1 percent at 20,036.
SAO PAULO, Brazil -- Most Latin American stocks closed higher in response to the U.S. Federal Reserve's rate cut. Brazil's Ibovespa index rose 4.4 percent to close at 39,993, while Mexico's IPC index jumped 4.7 percent to close at 22,033. Chile's IPSA rose 0.5 percent to close at 2,336 and Argentina's Merval index climbed 2.5 percent to close at 1,143. Colombia was the exception: The IGBC index slid 0.1 percent to close at 7,803.
TOKYO -- Japan's Nikkei 225 stock average closed down 96.64 points, or 1.1 percent, to 8,568.02. Elsewhere in Asia, Hong Kong's Hang Seng index was 83.26 points, or 0.6 percent, higher at 15,130.21, and South Korea's Kospi edged up 0.3 percent to 1,161.56. Thailand's key SET index rose 1.9 percent to 445.31, while Australia's benchmark index declined about 1 percent.
MOSCOW -- Russia's industrial production plunged beyond expectations in November, fresh evidence that the economy may be entering a recession that will be deeper than previously feared. Output fell a stunning 10.8 percent from October to November, an official from the Federal Statistics Service's press office said. Production contracted 8.7 percent in November from the same month last year, marking the biggest falls since the 1998 financial crash. Manufacturers have been strangled by choked credit markets and plunging demand for commodities, particularly metals.
CAIRO, Egypt -- Saudi Arabia's central bank cut two key lending rates by 50 basis points, as the Arab economic powerhouse pivotal to the region's economic health battles the effects of the global financial crisis. The Saudi Arabian Monetary Agency's decision to cut the repurchase rate and the reverse repurchase rate marked its latest efforts at boosting liquidity and supporting private sector growth in the kingdom. SAMA lowered the repo rate -- the rate at which it lends money to commercial banks -- to 2.5 percent from 3 percent, and reduced the reverse repo rate to 1.5 percent from 2 percent.
STOCKHOLM, Sweden -- Sweden's government cut its forecasts for economic growth until 2011 due to the effects of the global financial crisis.The government now expects gross domestic product to fall by 0.8 percent in 2009. It had previously forecast an increase of 1.3 percent. The unemployment rate is now expected to reach 7.7 percent in 2009, compared with 6 percent in previous forecasts. It is then expected to continue climbing to 8.5 percent in 2010 before falling back to 8.2 percent in 2011. The 2010 GDP forecast was downgraded to a growth rate of 1.5 percent from 3.1 percent previously, while the growth prediction for 2011 was cut to 3 percent from 3.5 percent. The OMX Stockholm 30 index ended down 1.3 percent at 651.18.
PODGORICA, Montenegro -- The International Monetary Fund warned that Montenegro's economy -- one of the fastest growing in Europe -- will slow down dramatically next year amid the global financial crisis. An IMF official said Montenegro's growth rate in 2009 could slide to only 2 percent, way down on the 8 percent expected this year, because of the expected slowdown of foreign investments.
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