Business | Markets
Leaders press for reforms
European leaders pressed yesterday for an overhaul of global financial structures, building on trillion-dollar bank bailouts announced this week, as signs of global recession mounted.
- Reuters
- Published: 23:32 October 15, 2008
New York/Brussels: European leaders pressed yesterday for an overhaul of global financial structures, building on trillion-dollar bank bailouts announced this week, as signs of global recession mounted.
The United States reported its biggest monthly decline in retail sales in more than three years, along with other negative econ-omic data, and markets around the world fell.
EU leaders called for fin-ancial reforms as they arrived in Brussels for a meeting, after committing Dh11.02 trillion ($3 trillion) this week to rescue European banks and break a logjam in money markets that has choked off lending, in the worst financial crisis since the Great Depression.
The US government followed with similarly radical action to stem the crisis, which began with a US housing market collapse and now threatens econ-omies worldwide.
"The IMF has got to be rebuilt as 'fit for purpose' for the modern world. We need an early warning system for the global economy," British Prime Minister Gordon Brown told reporters in Brussels.
German Chancellor Angela Merkel also told her parliament that new international financial rules were needed with the International Monetary Fund taking on a bigger supervisory role.
The United States on Tuesday offered to take up to $250 billion worth of equity in its banks, an astonishing move in the home of free market capitalism.
President George W. Bush stressed that the move was temporary. "I'm confident in the long run this economy will come back," he told reporters before a cabinet meeting yesterday.
Dow Jones
Even if a banking sector collapse has been averted, a recession has not, a fact markets seized upon.
The Dow Jones industrial average fell 3 per cent and the S&P 500 index was down 3.5 per cent. US bank JP Morgan Chase said third-quarter profit plunged 84 per cent, while Wells Fargo reported a drop in earnings of 25 per cent. Coca-Cola said quarterly profit rose as strong international demand offset falling volume at home.
European shares shed 4 per cent. Oil fell more than $3 toward $75 a barrel.
In addition to a 1.2 per cent drop in September retail sales in the United States, wholesale prices dropped 0.4 per cent and manufacturing in New York state fell in October.
British unemployment rose the most in 17 years in the three months to August as the jobless rate increased to 5.7 per cent, its highest level in eight years, official data showed. German economic growth will only be slightly above zero in 2009, Finance Minister Peer Steinbrueck said. And two US Federal Reserve officials noted risks to the world's biggest economy. World governments have pledged about $3.2 trillion to shore up banks and revive bank-to-bank lending - that on top of open-ended central bank commitments to inject funds into money markets and a coordinated round of interest rate cuts last week.
Lending rates fell, but traders said there was no real evidence of lending between banks for anything but short periods.
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