Job Cuts Mount But Banks Help Ease Investor Fears

Banks, retailers and manufacturers, including electronics maker Philips, announced thousands of job cuts on Monday, yet financial shares rose as news from major banks helped ease investor fears.

The announcement of a giant $68 billion takeover of U.S.-based Wyeth by world No.1 drugmaker Pfizer also offered evidence that big corporate deals can still be done.

However, Dubai-based DP World, one of the world's largest container port operators, said it was putting all expansion projects under review and would cut costs and freeze recruitment as growth slows in 2009.

DP World, which operates 48 marine terminals and 13 new port developments in 31 countries worldwide, had posted a 122 percent increase in first-half profit as recently as August and said then business was accelerating in the second half as emerging markets trade mitigated a global economic downturn.

"The economic environment remains extremely fragile," said Commerzbank equity strategist Hans-Juergen Delp.

Crisis-hit European banks announced losses and job cuts, including a shake-up at Dutch financial group ING and a worse-than-expected final quarter from top French bank BNP Paribas.

But shares in Britain's Barclays leapt by 60 percent after it said its projected 2008 pretax profit of more than 5.3 billion pounds ($7.3 billion) would include significant writedowns of 8 billion pounds and that the bank had made a good start to 2009.

Meanwhile, the credit crunch claimed the government of Iceland, which Prime Minister Geir Haarde said had fallen apart under the pressures of the financial crisis.

The Norwegian government was also forced to dip deeper into its reserves and presented a $2.87 billion fiscal stimulus package to prevent unemployment surging as it faces a recession.

"This is the most ambitious fiscal stimulus proposed in more than 30 years to boost growth and employment," Finance Minister Kristin Halvorsen told parliament.

BANKS

Banks have borne the brunt of the credit crisis, which was sparked by mass defaults on U.S. home loans. The sector has seen a wave of consolidation as leading banks around the world have collapsed or been taken over.

French bank BNP Paribas predicted a net loss of about 1.4 billion euros for the fourth quarter alone while rivals Societe Generale and Credit Agricole responded to the uncertain environment by deciding to merge their asset management divisions.

ING said it faced a 1 billion euro loss for 2008 and would ask the government to guarantee 22billion euros of troubled loans. It also cut 7,000 jobs.

But at Barclays, Chairman Marcus Agius and Chief Executive John Varley said in an open letter to staff that record income generation in 2008 meant the bank would still report strong results and it had no need to raise fresh capital.

JOB LOSSES GROW

In Amsterdam, Philips Electronics swung to a fourth quarter net loss and said it would cut 6,000 jobs, while Dutch financial group ING revealed plans for 7,000 job losses as it took a 2008 loss of 1 billion euros ($1.3 billion) and tapped into 22 billion euros of Dutch state loan guarantees.

Corus, Europe's second-largest steelmaker, said 3,500 jobs would go worldwide, including 2,500 in the UK, as the company, owned by India's Tata Steel, sought to boost operating profit by more than 200 million pounds a year.

British shoe retailers Barratt and Priceless, with 400 stores and 5,450 workers across the country, went into administration in the latest sign of the consumer slowdown.

Meanwhile the French state plans to inject 5 billion euros ($6.5 billion) into banks with the aim of financing airplane purchases to help European plane maker Airbus, a French government source said on Sunday.

Japanese stocks closed at their lowest in almost three months on Monday, while the dollar gained against the euro and sterling as investors shunned risk, and oil prices fell on forecasts of a deepening global downturn.

However European shares gave up early losses to turn higher, led by a surge in ING on hopes the new state guarantees will bolster its finances and as Barclays flagged a strong start to the year.