Big US job losses likely to spur more rate cuts

Investors have been nervous about the fate of the cash-starved industry, the failure of which would hit a chain of parts suppliers and financiers that spans the world.

A report on Friday expected to show the biggest monthly US jobs loss in 26 years is set to pile more pressure on the Federal Reserve to slash rates again and add urgency to an automaker bailout as the global economic crisis deepens.

Australia was also trying to protect its automobile business, pledging A$2 billion ($1.3 billion) to help car dealers, while South Korea repeated promises to do more to boost suffering companies, including the automobile industry.

The chief executives of General Motors Corp and Chrysler LLC told deeply skeptical lawmakers on Thursday they would restart merger talks to win a slice of up to $34 billion in emergency aid being considered in Washington.

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Investors have been nervous about the fate of the cash-starved industry, the failure of which would hit a chain of parts suppliers and financiers that spans the world.

“Concerns have spread that financial institutions including Japanese ones wouldn’t be able to escape unscathed if big US automakers were to go bankrupt,” said Tsuyoshi Segawa, an equity strategist at Shinko Securities in Tokyo. “We have no idea where and what could happen if a huge corporation like them failed.”

US Treasury Secretary Hank Paulson, in Beijing for a round of talks on greater cooperation with China, stressed the need to let a market-determined currency promote balanced economic growth. Washington has long urged Beijing to let its yuan currency rise to help shrink China’s huge trade surpluses.

JOB CUTS GROW

Companies such as US phone company AT&T Inc, Swiss bank Credit Suisse and Japanese brokerage Nomura Holdings Inc were already cutting their workforce by thousands, bracing for a long and hard global recession.

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The US economy, in the thick of a year-long recession, probably shed 340,000 jobs in November, according to economists polled by Reuters. Ahead of the latest employment data, dealers priced in a 3-in-5 chance the Fed would cut rates by 75 basis points to 0.25 per cent on December 16.

Central banks throughout Europe and Asia have slashed rates aggressively this week, with other more radical actions expected, as policymakers raced to stabilize financial markets and stop deflationary forces from getting further out of control.

The European Central Bank dropped its benchmark rate by 0.75 per centage point to 2.50 per cent, the euro zone’s biggest cut ever.

Sweden lopped a record 1.75 per centage points off its policy rate to 2.0 per cent, while the Bank of England chopped rates by 1.0 per centage point to 2.0 per cent, the lowest level since 1951.