Tokyo: Deepening turmoil in the global auto industry depressed investor sentiment Friday as the fate of the Big Three US automakers hung in the balance and cash-strapped Honda quit Formula One.
Asian stock markets limped to the end of a bruising week with investors cautious ahead of key US jobs data that are expected to underscore the worsening labour market in the world's largest economy.
Tokyo's Nikkei-225 index ended 0.08 percent lower and Sydney dropped 1.2 percent, although Seoul ended 2.1 percent higher and Shanghai added 0.86 percent.
The fate of the Big Three US automakers remained uncertain after contrite chief executives asked sceptical senators to deliver a multi-billion-dollar bailout for the ailing industry.
Following a near-six-hour grilling of the car giant bosses, senior Democratic Senator Chris Dodd said he would work to broker a compromise but it was unclear whether a majority of lawmakers were ready to back a rescue.
The Big Three bosses must repeat their ordeal for the House Financial Service committee on Friday.
Honda announced its shock withdrawal from Formula One over the global financial crisis, ending an involvement which began in the 1960s and raising further fears over the sport's future.
"This difficult decision has been made in light of the quickly deteriorating operating environment facing the global auto industry, brought on by the subprime problem in the United States," said Honda president Takeo Fukui.
South Korea said it was considering tax cuts for automakers who are struggling with declining domestic and overseas demand.
Anglo-Australian mining giant Rio Tinto said it was likely to shut its iron ore mines in Western Australia for nearly two weeks over Christmas to cut production in the face of reduced demand.
Investors were concerned that a record 75 basis point rate cut by the European Central Bank and a 100 basis point reduction by the Bank of England would not bring much relief to markets in the near term.
"The previous coordinated rate cuts didn't work. No one expects the European economy to hit a bottom thanks to the cuts this time around," said Kazuhiro Takahashi, equity trading information chief at Daiwa Securities SMBC.
But some investors were hoping Wall Street might rally after key US jobs data due out later Friday, because markets have already priced in a gloomy report.
"It's obvious the upcoming data will be bad but some investors expect buying will emerge again after the figures are out, no matter how bad they are," said Takahashi.
In the United States on Thursday, the Dow Jones Industrial Average tumbled 2.5 percent to 8,376.24 as investors stampeded toward the safety of US Treasury bonds as rising job losses hit sentiment.
US telecommunications giant AT&T said Thursday that it was cutting 12,000 jobs, chemical group DuPont announced about 2,500 layoffs and media group Viacom said it would shed about 850 jobs.
The heads of the struggling Big Three American automakers warned that their collapse could cost up to three million jobs in the auto sector and wider economy, and pleaded for 34 billion dollars in financial lifelines.
A government report released Thursday showed a drop in the number of new US unemployment claims in the past week, but the level remained high at 509,000.
Expectations are now growing for a 75 basis point interest rate cut by the US Federal Reserve next week to try to revive the world's largest economy, said Dariusz Kowalczyk, chief investment strategist at CFC Seymour.
US Treasury chief Henry Paulson said the United States and China would make 20 billion dollars available in trade financing to boost commerce amid the global slowdown.
Source - © AFP [05 December 2008]
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