WASHINGTON (AFP) — Job losses and prospects for more bleak US employment data hit investor confidence and the price of oil Friday despite sweeping interest rate cuts in Europe as fears mount for the fate of the US auto sector.
Stock markets were bracing for more bad news from Washington later in the day when job creation and unemployment figures for November were expected to show that the financial crisis had bitten deeper into the broad economy.
Barclays Capital analyst David Woo said that the US job figures were "expected by most to make ugly reading".
He commented: "It would probably take a decline of greater than 400,000 to shock the market on the downside -- a decline of this magnitude has not occurred since 1980."
A new round of job cuts by big US companies and news that US government unemployment aid had hit a 26-year high also dampened sentiment, undercutting the impact of historic interest rate cuts in Britain and the eurozone.
Stock markets are showing little enthusiasm for the rate cuts, which would normally be expected to boost sentiment as they reduce the cost of capital for companies and of credit for consumers.
Oil prices fell to 42.01 dollars a barrel, the lowest reading since January 2005, and were projected to slide further in the days ahead as recession-hit consuming countries cut back on demand.
In Russia, heavily dependent on oil exports, the central bank signalled that it had widened the corridor for the trading range of the ruble against a dollar-euro benchmark, which means the currency has been devalued for the fourth time in less than a month.
Nigeria, another major oil exporter, is also feeling the effects of a steady erosion in the price of crude, which is down 60 percent from record peaks of 147 dollars a barrel in July.
The Nigerian naira has weakened 8.5 percent to trade at 128 naira against the dollar as the country's central bank has moved to discourage foreign exchange speculators, dealers said on Friday.
European markets fell hard in mid-day trading, with the London FTSE 100 indes shedding 1.42 percent and the CAC in Paris 3.02 percent after a mixed performance in Asia, where investors turned cautious ahead of the US jobs report.
Analysts are predicting the data will reveal that the world's largest economy shed 325,000 non-farm jobs last month after a loss of 240,000 in October.
In an ominous foretaste of the Friday report, the Labor Department said Thursday that unemployment insurance claims had surged to a 26-year high.
"Overall, the claims data are pointing to the hardest landing, at least so far as employment is concerned, since the early 1980s," said TJ Marta, analyst at RBC Capital Markets.
"This data report suggests that we are entering the period of the worst data we are likely to see for the downturn."
Telecommunications giant AT&T said Thursday it was cutting 12,000 jobs, or about four percent of its workforce, beginning this month.
The chemical group DuPont said it would eliminate about 2,500 posts while media-entertainment group Viacom is to cut its workforce by seven percent, or 850 jobs.
The Big Three US auto makers, General Motors, Ford and Chrysler, who are huge employers, pleaded for 34 billion dollars in taxpayer bailouts from Congress, warning that their collapse could cost up to three million jobs.
But there was no clear hint of sufficient support in Congress to approve such a rescue.
"There's a high, high possibility of a bankruptcy by one of the (Big Three) auto makers which still could take place even if they get some funding from the federal government in this round of discussions," said Gregg Stein of Standard & Poor's ratings agency.
There were also fresh indications the auto sector was ailing in Asia and Europe as well.
The cash-strapped Japanese group Honda announced its shock withdrawal from Formula One, ending an involvement that began in the 1960s and raising further fears over the sport's future.
In Europe German luxury auto manufacturer BMW said sales plunged by more than 25 percent in November from the same month last year.
The auto maker's plight mirrors that of the recession-hit German economy as a whole, with Deutsche Bank forecasting that momentum could contract by up to 4.0 percent next year, a much steeper fall than even the government's most pessimistic prediction.
The upper house of the German parliament on Friday approved a 32-billion-euro (41-billion-dollar) stimulus package designed to spark 50 billion euros' worth of economic activity.
In Sweden, like Germany a member of the European Union, authorities proposed measures worth eight billion kronor (757 million euros, 966 million dollars) to shore up the labour market and construction industry.
In such an environment, unprecedented anti-recession action on Thursday by four European central banks had but little effect on investor spirits.
The European Central Bank cut the benchmark cost of borrowing by a record 0.75 percentage points to 2.50 percent shortly after the Bank of England returned British interest rates to levels last seen in 1951 with a full point reduction to 2.0 percent.
But on Wall Street Thursday the Dow Jones Industrial Average fell 2.5 percent as investors stampeded toward the safety of US Treasury bonds.
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