Global recession fears deepen as thousands of jobs axed

Thursday January 8, 6:14 PM

Global economic fears deepened on Thursday as Chinese computer giant Lenovo and Japanese component maker TDK Corp. axed thousands of jobs and South Korea warned it was on the brink of recession. Amid further lay-offs in Europe and the United States,

Lenovo, the world's fourth-biggest personal computer maker which had seen double-digit growth in profits until the third quarter of last year, said it would shed 2,500 workers -- roughly 11 percent of its global head count. "We are taking these actions now to ensure that in the uncertain economy, our business operates as efficiently and effectively as possible and continues to grow in the future," board chairman Yang Yuanqing said in a statement. The company's shares plunged 20 percent on the Hong Kong market Thursday, after being suspended Wednesday pending the release of the profit warning. The depth of the job cuts heightened fears about the health of the Chinese economy, with Lenovo admitting China's recent slowdown "affected what has historically been a major market for the group."

TDK Corp. shed 8,000 workers Thursday and announced the closure of four overseas plants in a bid to cope with the economic crisis. Chinese shares closed 2.38 percent down amid continued selling in banks on worries big investors will offload more financial shares, dealers said. In Hong Kong, similar worries led share prices to finish 3.8 percent lower. The concern over job losses was compounded by the announcement that 600,000 migrant workers left south China's industrial heartland last year amid shrinking exports and factory closures in Guangdong province. And in South Korea President Lee Myung-Bak called for "pre-emptive" government steps as new official data showed Asia's fourth largest economy teetering on the brink of recession. A monthly economic outlook report from the ministry of strategy and finance cited falling production and "anaemic" domestic demand and exports. South Korean exports plummeted 17.4 percent year-on-year in December, with the contraction likely to accelerate in January, the report said. Industrial output fell 14.1 percent year-on-year in November, the biggest ever year-on-year contraction, it added. Australia's largest investment bank Macquarie Group added to the gloom with a warning to investors that exceptionally challenging market conditions in the December quarter would hit profits. The financial crisis sent its net profit for the half year to September 30 plunging 43 percent to 604 million dollars, while it also reported significant restructuring costs, provisions and writedowns as a result of the turmoil. Macquarie's shares slumped 5.4 percent following the news. On the back of Thursday's announced job losses, TDK Corp. forecast a net loss of 28 billion yen (301 million dollars) for the financial year to March 2009 due to the stronger yen and tough business climate. Japan share prices closed down 3.93 percent, snapping a seven-day winning streak after grim economic and corporate news triggered heavy losses on Wall Street overnight. Prime Minister Taro Aso warned that a tumbling dollar was damaging for Asia's biggest economy, which has large stockpiles of the currency. The dollar weakened against the euro and the yen Wednesday amid increasing concerns over job losses in the United States, notably a report showing the US private sector lost 693,000 jobs in December. In Washington, US president-elect Barack Obama was expected to unveil more details of his economic stimulus plan Thursday, warning that drastic action is needed to shrink a record trillion-dollar US budget deficit. The non-partisan Congressional Budget Office warned the year-old recession would "last well into 2009," making it the longest US contraction since World War II. "Wall Street has not worked, our regulatory system has not worked the way it's supposed to," Obama said in an interview with CNBC, vowing a "substantial overhaul" of US financial markets. European workers are also feeling the brunt of the global recession, with official data showing that the number of people out of work in Germany rose by 114,000 in December to 3.1 million. Analysts expect the Bank of England later Thursday to intervene and cut its key interest rate to the lowest ever level.