World markets hit by spreading company woes

Worries that US titan General Motors could go bust have brought into sharp focus the impact of the global credit crunch on corporate America. In Asia and Europe there was also evidence that companies are being hurt by the credit squeeze. "Make no mistake, it does not matter where you live and work around the world, allowing GM to fail would affect each and every one of us and each and every economy too," warned analyst Howard Wheeldon at BGC Partners in London. In Asia on Wednesday, Tokyo finished down 1.29 per cent and Hong Kong dropped 0.7 per cent as concerns about plunging corporate profits and the weak global economy weighed on sentiment. Europe's main markets gained ground, after sinking into the red early on, with London up 1.19 percent and Paris adding 0.67 per cent, while Frankfurt was down 0.17 per cent. London shares were somewhat subdued after the Bank of England (BoE) warned that the British economy was probably already in recession - two straight quarters of negative economic growth - as the financial crisis takes its toll. The country's economy, which shrank by 0.5 percent in the third quarter of 2008, was likely to contract further in the current fourth quarter which runs until the end of December, the BoE said. "We are witnessing the economic downturn affect the wider economy and as the recession gathers pace this will raise further doubts about profitability," said City Index market strategist Joshua Raymond in London. In Paris, shares in Natixis bank plunged by more than ten percent after a press report, denied by the bank, that it had lost nearly a billion euros on trading activities and would issue a profit warning. Natixis, hit hard by the financial crisis, revealed special charges of about 500 million euros for October on Wednesday but denied the report that it had lost twice as much in trading activities. The bank, due to report quarterly results on Thursday, acknowledged a trading charge of 250 million euros and a similar separate charge for provisions related to the financial crisis. In Switzerland, insurer Swiss Life became another casualty of the global economic crisis on Wednesday after warning it will miss its profit targets for 2008, sending its shares spiralling about 15 percent lower. Overnight in New York on Tuesday, Wall Street stocks skidded deeper into the red but off their lows on fears of a collapse of General Motors and a series of troubling corporate news. GM president and chief executive Rick Wagoner had said Monday that the company was in such dire financial straits that it needed to line up a US government aid package to avert bankruptcy. In Asia on Wednesday, Japan's largest advertising firm Dentsu Inc. said half-year net profits tumbled 44 per cent as companies slashed spending, while Singapore Telecommunications posted a 12.1 percent fall in quarterly earnings. Japanese consumer confidence hit a record low as Asia's largest economy showed fresh signs of stalling, a government survey showed. Financial turmoil may be easing "but the fears of a global recession and poor corporate news are prevailing," said Alex Huang, an assistant vice president at Mega International Investment Services in Taipei. "Should General Motors collapse, its impact would be massive," he added. Elsewhere in Asia, Sydney finished 0.8 per cent lower, Seoul shed 0.4 per cent and Taipei declined 0.5 per cent. There were also hopes that world powers will agree on new action to tackle the worst financial crisis in decades when they meet in Washington at the weekend. But experts said the summit of leaders of 20 major advanced and emerging economies may struggle to come up with concrete measures, despite the broad-based concern over the possibility of global recession. Markets appeared to overlook government action in the United States to set a floor on home foreclosures and downward spiralling real estate prices with a sweeping, aggressive programme to modify troubled mortgages. Investors were unsettled by signs of differences between President George W. Bush and president-elect Barack Obama over how to help the troubled big-three US automakers General Motors, Chrysler and Ford. Markets were meanwhile nervously waiting for US October retail sales figures and a key consumer confidence indicator due Friday, expected to reflect a sharp deterioration in the world's biggest economy.