A Look at Economic Developments Around the World

By THE ASSOCIATED PRESS
Published: January 21, 2009
Filed at 6:25 p.m. ET
A look at economic developments and stock-market activity around the world Wednesday:
------
LONDON -- Unemployment in Britain rose to nearly 2 million in November, fuelling speculation that statistics later this week will show the economy contracting at its sharpest rate since the early days of Margaret Thatcher's government -- by up to 1.5 percent in the final quarter compared to the previous three month period, on top of the 0.6 percent decline posted in the third quarter. Meanwhile, the British pound fell to a 23-year low against the dollar and a record low against the yen amid mounting fears about the British banking sector and expectations the Bank of England will start pumping money into the economy within weeks. A group of influential British lawmakers wrote a letter to the financial regulator expressing concern at last week's lifting of a ban on short selling of financial stocks, which was immediately followed by a sharp sell-off in leading bank shares. Record losses at Royal Bank of Scotland have raised concerns about the nationalization of more banks. The benchmark FTSE 100 index closed down 31.52 points, or 0.8 percent at 4,059.88.
------
BRUSSELS, Belgium -- European Central Bank President Jean-Claude Trichet lent his weight to new British and French moves designed to support their economies by shoring up banks in an attempt to get them lending to businesses and consumers again. He said the euro-zone central bank had to make sure that banks return financing to the economy -- in a year where governments will be the only driver of demand in Europe's recession-hit economies.
------
BERLIN -- The German government forecast that the country's economy will shrink by 2.25 percent this year, which would easily be the nation's worst performance since World War II as exports decline sharply amid the global downturn. The new forecast for Europe's biggest economy was down drastically from the government's previous prediction, made in mid-October, for 0.2 percent growth. The DAX closed up 21.30 points, or 0.5 percent, at 4,261.15.
------
PARIS -- France is preparing a second round of bank bailouts, which should get a quick approval by European authorities, the finance minister said. Christine Lagarde said the second tranche of euro10.5 billion ($13.58 billion), which must be discussed with the European Commission, is expected to gain approval faster than the first round. France's CAC 40 dropped 19.71 points, or 0.7 percent to 2,905.57.
------
SINGAPORE -- Singapore slashed its 2009 growth forecast for a second time this month, saying the economy could shrink as much as 5 percent, as the city-state reels from plunging demand for its exports. During the last two weeks, weaker than expected retail sales, unemployment and industrial production in the U.S. and Europe, and falling Asian exports forced the government to rethink its expectations for this year, the Trade and Industry Ministry said. The Straits Times index fell 1.1 percent to 1,704.52.
------
SHANGHAI -- Chinese shares retreated for the first time in four days on dismal corporate earnings forecasts. The benchmark Shanghai Composite Index ended down 0.5 percent, or 9.09 points, to close at 1985.02. The Shenzhen Composite Index for China's second exchange faded 0.4 percent to 604.57.
------
SAO PAULO, Brazil -- Brazil's central bank reduced its benchmark interest rate to 12.75 percent as industry and labor leaders called for eased lending to boost the country's stalling economy. Policy makers slashed the so-called Selic rate by 1 percentage point to its lowest level since March 2007. The cut was Brazil's first since September 2007. The Ibovespa stock index rose 3.4 percent to 38,543. Mexico's IPC index rose 1.5 percent to 19,497, and Argentina's Merval index jumped 1.7 percent to 1,062.
------
HONG KONG -- Hong Kong's main stock index retreated nearly 3 percent amid worries that banking woes will prolong the global slump. The blue-chip Hang Seng Index dropped 381.19 points, or 2.9 percent, to 12,578.58.
------
TOKYO -- Ominous clouds hovering over the global banking sector sent Japanese stocks tumbling again. The benchmark Nikkei 225 stock average lost 164.15 points, or 2 percent, to 7,901.64. -- its lowest close since early December. The broader Topix index fell 2.2 percent to 787.15.
------
MANILA, Philippines -- Shares plunged, tracking the overnight slump on Wall Street on concerns over the U.S. economy. The Philippine Stock Exchange index shed 57.81 points, or 3 percent, to 1,840.12, extending Tuesday's 1.3 percent loss.