Obama says efforts working but economic fears weigh

WASHINGTON/SINGAPORE - Uncertain corporate outlooks and data showing the U.S. economy is still suffering weighed on global stocks on Wednesday, despite claims from U.S. President Barack Obama that his remedies were starting to work.

By (Reuters)

Published: Wed 15 Apr 2009, 12:53 PM

Last updated: Thu 2 Apr 2015, 3:36 AM

In China, which is rolling out its own $585 billion stimulus plan, gross domestic product probably grew at its slowest annual rate on record in the first quarter, according to a local media report. But the quarter-on-quarter growth might point to a recovery in the world’s third-largest economy.

“China’s annual GDP growth in the first quarter was higher than 6.0 percent, but lower than the 6.8 percent increase in the fourth quarter of 2008,” according to the the Shanghai Securities News website (www.cnstock.com). Official data is due for release on Thursday.

Asian shares fell from six-month highs, following losses on Wall Street, amid concerns that the effects of the global financial crisis will linger.

Japan’s Nikkei average fell 0.8 percent, while MSCI’s measure of stocks elsewhere in the Asia-Pacific region fell 1.2 percent.Overnight, the S&P 500 fell 2 percent as a surprise fall in U.S. retail sales in March further dented hopes that the recession there was abating and news from companies remained mixed.

Intel Corp beat forecasts with its results and said it believed personal computer sales hit bottom in the first quarter. But the world’s top chipmaker did not give a formal revenue outlook for the current quarter, sending its shares down 4.6 percent in after-hours trade.

No. 2 U.S. Internet search provider Yahoo Inc is preparing to lay off several hundred workers, a source with knowledge of the situation told Reuters.

Obama Upbeat

Mounting job losses, a lack of access to credit and a slump in the value of investments has played havoc with consumer confidence around the globe.

Seeking to reassure Americans, President Obama said moves to recapitalise banks, strengthen the housing market and rescue the auto sector were “necessary pieces of the recovery puzzle.”

“And taken together, these actions are starting to generate signs of economic progress,” he said in a speech on the moves taken since he took office. “There is no doubt that times are still tough. By no means are we out of the woods yet.”

U.S. Federal Reserve Chairman Ben Bernanke also said there were hopeful signs, including the latest data on home sales, home-building and consumer spending, as well as sales of new cars.

“A levelling out of economic activity is the first step toward recovery,” he said in a speech.

But both Bernanke and White House adviser Christina Romer said the economy was still contracting.

Lingering Uncertainty

Global financial conditions could remain tight for several more years, a top official at Australia’s central bank said.

“What happens over the next few years, at least, is highly uncertain,” said Luci Ellis, the head of the Reserve Bank of Australia’s Financial Stability Department, told a conference. “Confidence in the financial system remains fragile.”

Most of the world is experiencing “what has already been a long and severe recession,” making issues of regulatory reform more pressing, another top Federal Reserve official said.

Eric Rosengren, president of the Federal Reserve Bank of Boston, said the current financial crisis highlighted the need for a systemic risk regulator, but a regulator would face “profound challenges” and would need sufficient authority to change financial institutions’ behaviour.

“The need for such extensive government intervention on an essentially worldwide basis highlights the importance of a more stable financial infrastructure—and I believe, to have organisations with explicit responsibility for financial stability,” he said in remarks prepared for delivery at the Seoul International Financial Forum.

Thailand, which has been grappling with political instability as well as the global financial turmoil, may increase borrowing and expand its stimulus package, the finance minister told the Financial Times in an interview.

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