Crisis deepens but Europe offers glimmers of hope

25th April 2009, Comments 0 comments

With the world hit by the worst downturn since the 1930s, there was some relief however as a key business confidence index in Germany rose in April indicating that the crisis in Europe's biggest economy may be starting to ease.

London -- The recession in Europe deepened on Friday and corporate results took another dive but some retail market and business confidence data shone glimmers of economic hope in the darkness.

With the world hit by the worst downturn since the 1930s, there was some relief however as a key business confidence index in Germany rose in April indicating that the crisis in Europe's biggest economy may be starting to ease.

There was also an unexpected rise in retail sales in Britain by 0.3 percent from February to March, while consumer spending in France climbed by a surprising 1.1 percent largely because of a boost in car purchases.

"This indicator confirms that household spending is showing resilience. A good showing by this key driver of demand leaves us hopeful for a recovery in the middle term," France's INSEE statistical agency said in a statement.

Referring to the rise in Germany's Ifo business confidence index, Unicredit bank analyst Andreas Rees said: "The signs are clearly mounting that the German economy will manage a turnaround in the second half of this year."

The positive data helped boost European stock markets, analysts said, with London's FTSE 100 index of leading shares soaring 3.43 percent at the close, the CAC 40 in Paris up 3.13 percent and the Frankfurt Dax rising 3.00 percent.

But elsewhere there were more bleak reports from the economic frontlines.

In Spain, unemployment soared to 17.36 percent in the first quarter of this year as the number of jobless almost doubled over the past 12 months. The unemployment rate is expected to reach almost one in five by next year.

"It is a terrible figure," said Spain's secretary of state for social security, Octavio Granado. "We are at the worst point of the crisis, in the very eye of the storm."

In an equally struggling Britain, the government's hopes of a quick recovery starting this year were thrown into doubt after figures showed the economy shrank at its fastest pace in 30 years in the first quarter of 2009.

Gross domestic product (GDP) contracted by 1.9 percent on a quarterly basis compared with a decline of 1.6 percent in the last quarter of 2008, the Office for National Statistics (ONS) said, in the worst quarterly result since 1979.

On the other side of the world, Japan too was flailing in the crisis.

Nomura, one of the world's biggest banks, announced a record 7.3-billion-dollar annual loss, stung by financial turmoil and the cost of buying large parts of failed Wall Street investment bank Lehman Brothers.

The poor performance underlined the deepening woes of Japan's financial giants, which were initially seen as relatively resilient to the fallout from the US-born credit crunch but have been hit by soured investments.

"The financial confusion has spread to the real economy since November and the speed was faster than the market had anticipated," Nomura's chief financial officer Masafumi Nakada said.

"We are not yet optimistic about the business environment for the current year, but we would like to return to the black as quickly as possible by moving ahead swiftly with cost cuts," Nakada said.

In other corporate news, US auto giant Ford posted a 1.4-billion-dollar loss for the first quarter but said its restructuring plans were on track.

Swedish truckmaker Volvo reported a higher-than-expected quarterly loss and Spanish airline Iberia warned it will make a net loss in 2009.

Eni, Italy's biggest oil company, reported profits were down 43 percent in the first quarter compared to the first three months of 2008.

AFP/Expatica

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