Citigroup Cuts; Earning Worries in Europe

123jump.com Staff
17 Nov, 2008
New York City

World markets declined after meeting of 20 nations failed to send a clear message. Japan slides into recession as third quarter GDP declined 0.4%. European stocks fell after UK industry group estimated longer and deeper recession. Citigroup to cut 50,000 staff and trim expenses by 20% from peak.

[R]10:15 AM New York – Citigroup plans to cut 50,000 staff. Europe worries recession. Asia drop after G 20 meeting. Japan enters into recession.[/R]

U.S. stocks opened lower and fell further after forty five minutes of trading. European markets fell on the earnings worries and in Asia Japan joined Hong Kong with two quarterly declines in economic growth.

The meeting of 20 advanced and emerging nations over the weekend failed to produce any accord or development that will alter the course of the global economic downturn. While nations looked for ways to sustain the growth but failed to tackle the root cause the problem. The U.S. consumes more than it can afford to pay for and Asian economies rely on the exports to drive their economic growth.

The U.S. current account deficit in the last ten years have flooded the world markets with excess dollar that are the root cause of the current bubble in the housing market and the subsequent collapse in the banking sector.

Citigroup may reduce its head count by 50,000 and reduce its operating expenses by 20% from the peak in 2005, according to the two people who were present at the town hall meeting. The larger than estimated cut in payroll surprised the market. Citigroup ((C)) in the early trading fell.

In Japan, third quarter GDP growth declined at 0.4% after falling at 0.1% in the second quarter. Weakening exports and weak rise in domestic consumption played a key role in the economic weakness.

European markets traded lower between 2% and 3% after the earnings worries dogged Swiss, UK and German markets. The industry trade group suggested that UK economy will shrink by 1.7% in 2009 and predicted that the current recession will be deeper and longer than previously estimated.

Banks in European trading fell sharply on the UK recession worries. HBOS Plc, Banco Santander and Paribas dropped between 6% and 11%.

Asian Markets Review

The Nikkei 225 Index in Tokyo closed higher 60.19 or 0.71% to 8,522.58, Hang Seng index in Hong Kong decreased 13.13 or 0.10% closed to 13,529.53 CSI 300 index in China higher 43.57 or 2.24% closed to 1,987.22. ASX 200 index in Australia decreased 95.10 or 2.54% to close 3,653.00. The KL Composite index in Malaysia higher 2.41 or 0.27% closed to 884.06.

The Kospi Index in South Korea decreased 9.94 or 0.91% to close at 1,078.32. SET index in Thailand closed higher 4.24 or 0.99% to 434.21 and JSE Index in Indonesia decreased 27.44 or 2.17% to 1,236.93. The Sensex index in India decreased 94.41 or 1.01% closed to 9,291.01.

Europe Markets Review

In London FTSE 100 Index traded lower 65.58 or 1.55% to 4,167.39, in Paris CAC 40 Index decreased 60.33 or 1.83% to 3,231.14 and in Frankfurt DAX index traded lower 124.51 or 2.64% to 4,585.73. In Zurich trading SMI decreased 145.04 or 2.49% to 5,689.71.