Stocks slide, Toyota warns of 'unprecedented' crisis

10:40, 06 November 2008
Ukraine
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The global auto industry faces an unprecedented crisis

Toyota Motor slashed its profit forecast Thursday, warning the global auto industry faces an "unprecedented" crisis as Asian stocks tumbled on fears the US is sinking deeper towards recession, AFP reported.

The Japanese giant became the latest automaker to reveal plunging profits due to the financial crisis, following on the heels of BMW, Nissan and Honda.

Toyota , vying with General Motors for the title of the world`s top automaker, cut its annual profit forecast by more than half after a terrible year so far.

It now expects a 68 percent plunge in net profit to 550 billion yen (5.6 billion dollars) -- the first drop in nine years.

"The financial crisis is negatively impacting the real economy worldwide, and the automotive markets, especially in developed countries, are contracting rapidly," Toyota executive vice president Mitsuo Kinoshita said.

"This is an unprecedented situation."

Elsewhere in the transport sector, European aircraft manufacturer Airbus warned it expects a sharp reduction in new orders in 2009 as the global economy slows.

Amid the gloomy news, Asian stock markets fell heavily. Japan`s Nikkei stock index plunged 6.53 percent even before the Toyota warning, which came after the close of trade.

The drop wiped out gains seen a day earlier on hopes that US president-elect Barack Obama will get to work on fixing the world`s largest economy in the face of the worst financial crisis in decades.

"Now that the event is over, investors are sobering up and looking at the economic gloom," said Mizuho Investors Securities broker Masatoshi Sato.

Seoul ended with a loss of 7.6 percent while Sydney shed 4.3 percent. Hong Kong shares were down 6.4 percent at midday.

The sharp falls came after the Dow Jones index slid 5.05 percent on Wall Street on Wednesday as investors braced for a gloomy economic ride after the euphoria of Obama`s election victory faded.

"Dismal macroeconomic data and poor corporate results reminded investors that we are only at the start of a deep recession," Dariusz Kowalczyk, chief investment strategist at CFC Seymour in Hong Kong, wrote in a note.

The euro dropped to 1.2854 dollars in Tokyo afternoon trade, down from 1.2962 late Wednesday in New York. The dollar fell to 97.70 yen from 98.33.

Investors were anticipating further cuts to interest rates on Thursday by both the Bank of England (BoE) and the European Central Bank amid fears of recessions in Europe`s biggest economies.

Some economists are even forecasting the BoE would follow up last month`s emergency half-point reduction to 4.50 percent with a cut of 100 basis points.

In Japan, the lower house of parliament approved a plan to inject capital into ailing banks if needed to contain the fallout from the financial crisis.

Markets were also looking ahead to crisis talks on the global financial turmoil in Washington on November 15 between leaders of the Group of 20 rich countries and major developing economies.

Leaders will likely agree on an "action plan" including near-term steps to help fix the global economy, a senior US official said Wednesday.

As efforts to contain the financial crisis continued, the International Monetary Fund approved a 16.4 billion dollar loan aimed at rescuing Ukraine .

Europe`s biggest economy, Germany , approved a stimulus package costing 23 billion euros (30 billion dollars) to pump up the ailing economy.

In the US, fresh data added to the gloom over the economic outlook. A report by the Institute for Supply Management showed activity in the services sector shrank more sharply than anticipated in October.

A survey showing the US private sector shed 157,000 jobs in October added to worries ahead of official figures due Friday that are expected to show a rise in the jobless rate from a five-year high of 6.1 percent in September.

AFP

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