| | |  Business News | November 2008 
Fear Stalks the World’s Economies
 Financial Times
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| | US figures showed 542,000 workers filing new claims for jobless benefits last week, the highest number since the early 1990s recession and well above economists’ forecasts of 500,000. | | |
Fears of a severe recession gripped financial markets last week as dire US unemployment figures helped drive long-term interest rates to record lows.
Economic news across the world was almost uniformly bad as slumping Japanese exports threatened to push the economy deeper into recession and the Swiss central bank unexpectedly slashed interest rates by a full percentage point.
In the UK, the FTSE 100 fell below 4,000 for the first time since October, closing 3.3 per cent lower, as Rolls-Royce became the latest company to be hit by the economic downturn, announcing plans to cut up to 2,000 jobs next year.
Officials in China warned that the employment outlook was becoming “grim” as the global crisis triggered fresh factory closures in the export sector.
Two-year US interest rates slid below 1 per cent to their lowest levels amid a gathering conviction that the Federal Reserve would cut interest rates again next month. UK bond yields dropped to their lowest since the second world war.
“This is all about disinflation and deflation,” said Alan Ruskin, a strategist at RBS Greenwich Capital. “Rates can go low and stay low for a protracted period.”
The rising risk of a deflationary crunch also sparked a general sell-off in equity prices and pushed oil prices below $50 a barrel for the first time since 2005.
“For some time it has not been a question of whether we will see deflation but if it will be the benign kind, where lower commodity prices boost consumption, or a malign spiral of falling prices pushing up the value of debt,” said Julian Jessop, chief international economist at the consultancy Capital Economics. “Today’s figures all point to the malign variety.”
US figures showed 542,000 workers filing new claims for jobless benefits last week, the highest number since the early 1990s recession and well above economists’ forecasts of 500,000.
Some short-term US Treasury bills were quoted below zero per cent. Two-year bond yields at one point fell to 0.96 per cent, the lowest since the two-year note was created in 1976. Yields on the 30-year bond fell to a record low of 3.71 per cent. |
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