NEW YORK (Reuters) – European data pointed toward deeper recession and General Electric reported a 44 percent drop in quarterly profit on Friday as U.S. President Barack Obama met with congressional leaders over his $825 stimulus proposal.
British data confirmed the economy had gone into recession for the first time since 1991 when GDP contracted a larger-than-expected 1.5 percent in the last quarter of 2008 compared with the previous three months.
Euro zone services and manufacturing activity contracted at a slightly slower pace in January, though surveys remained in recessionary territory, bolstering expectations the European Central Bank will cut interest rates again in March. Spanish unemployment surged to a nine-year high at nearly 14 percent.
“There is some hope here that the worst is over, but we don’t expect any sharp upturns soon,” said Chris Williamson, chief economist at Markit, which conducts the euro zone Purchasing Managers Index. “The environment as we move into 2009 is extremely adverse.”
Stocks continued to slip. The Dow was down 1.3 percent and European stocks were off less than 1 percent. Japan’s Nikkei closed 3.8 per cent lower.
OBAMA: STIMULUS “ON TARGET”
Obama said efforts appeared to be “on target” for winning approval for an economic stimulus plan by mid-February despite some opposition from Republicans.
Obama told reporters as he met a bipartisan group of congressional leaders at the White House that the United States was facing an “unprecedented economic crisis” that had to be dealt with quickly.
“I recognize that there are still some difference around the table and between the administration and members of Congress about particular details on the plan,” Obama said.
General Electric’s profit slump to $3.72 billion was in line with expectations as the world’s largest maker of jet engines and electric turbines closed out one of the toughest years in its 117-year history.
Its shares have tumbled about 60 percent over the past year, erasing some $200 billion in market value.
“GE really represents the whole market. GE is the bellwether because they operate in almost all segments of the market and there’s no segment here that you can really look at and say that looks good,” said Paul Mendelsohn, chief investment strategist at Windham Financial Services in Vermont.
“On average companies are saying they expect a very, very challenging year and that’s part of what’s causing the problem,” he said.
In the technology sector, South Korea’s Samsung Electronics posted its first-ever quarterly loss and German memory chip maker Qimonda filed for insolvency.
South Korea’s Samsung said oversupply and uncertain demand on the chip market would continue, joining a host of technology companies including Microsoft and Nokia suffering from diving prices and plunging consumer demand.
Shares in the electronics and entertainment group Sony Corp fell 7 percent after it warned of a record annual operating loss.
Toyota, the world’s biggest auto maker, was considering unprecedented staff cuts in Britain and North America, a company source familiar with the matter told Reuters.
Bank stocks have also borne the brunt of anxieties about the global slowdown. In Britain Barclays Plc shares slumped for a ninth straight day, off another 15 percent, as concerns persisted it may require further capital or be nationalized, despite another attempt by its chief executive to calm investors.
Chief Executive John Varley said he was confident a second bailout plan unveiled by the British government on Monday would boost credit supply and the economy.
By Daniel Trotta
(Reporting by Reuters bureaus around the world; Editing by Brian Moss)