Japan became the latest major country to fall into recession Monday as world stock markets reacted with little enthusiasm to a weekend summit in Washington called to contain the global finance crisis.
With the British and French economies also said to be weakening fast, the head of the European Commission called for a Europe-wide fiscal stimulus plan.
In Germany Chancellor Angela Merkel was to hold crisis talks with executives at automaker Opel, which is seeking government help as its US parent company, General Motors, struggles to stave off bankruptcy.
But German Finance Minister Peer Steinbrueck ruled out a financial rescue package for the auto sector.
Investors in Asia and Europe were unimpressed with a vague pledge made Saturday by Group of 20 leaders to join forces to galvanize growth and overhaul the world's financial architecture.
The G20, grouping developed and developing countries, stopped short of announcing specific steps such as coordinated stimulus spending.
Their deliberations therefore appeared to offer scant hope for short-term action to curb the damage, analysts said.
"In the midst of an emergency crisis, to have a statement that reads 'We will cooperate with each another' is all but meaningless," said Daisuke Uno, chief strategist at Sumitomo Mitsui Banking Corp.
"Market sentiment has soured and with all eyes back on the theme of global recession," he said.
Major European stock exchanges were well into negative territory at mid-day following a mixed performance in Asia. The yen strengthened as risk-averse investors, despite news of a Japanese recession, sought shelter in what they saw as a safe currency.
In London the FTSE 100 index was down 1.12 percent while Paris had fallen 1.57 percent and Frankfurt 1.31 percent.
Tokyo's Nikkei index finished 0.71 percent higher, despite figures showing Japan had gone into recession for the first time in seven years.
Shanghai also leapt 2.22 percent on new expectations that China will introduce further market boosting measures and after two major airlines were promised massive cash injections.
But Hong Kong, which is also now in recession, lost 0.1 percent. Sydney lost 2.5 percent, Seoul was down 0.9 percent, Taipei shed 0.29 percent and Singapore gave up 0.53 percent.
"Investors were very sensitive at the end of last week to rumours of institutional reform and market controls," said French brokers Aurel.
"But at the end of the summit no concrete measures were taken."
Analyst Julian Jessop at Capital Economics said while the G20 summit "failed to deliver any new stimulus measures to rescue the world economy from the current recession," the gathering did at least take some "first steps on the reform of the global financial system necessary to make it less likely that this crisis will happen again."
There was no let-up in the flow of bad economic news. Official data showed Japan, the world's second largest economy, contracted 0.1 percent in the third quarter.
"This is not going to be a short or painless recession," warned Noriko Hama, a professor and economist at Doshisha University.
The Bank of France predicted that the French economy was likely to contract by 0.5 percent in the last quarter of the year, leaving growth for the year at just 0.9 percent.
France narrowly escaped recession with growth of 0.1 percent in the third quarter after its economy shrank 0.3 percent in the second.
The Confederation of British Industry (CBI), an employers' organisation, warned that a recession in Britain would be longer and deeper than it predicted only two months ago.
Its November outlook said Britain would likely be in recession for most of 2009 before beginning a "slow recovery" during 2010, and that unemployment would peak at around 2.9 million in mid-2010.
In September, the CBI downgraded its 2008 growth forecast from 1.7 percent to 1.1 percent. It has now taken it even lower, from 1.1 percent to 0.8 percent.
In 2009 it sees the British economy shrinking by 1.7 percent against a forecast in September of 0.3 percent growth.
With three eurozone nations already in recession, Germany, Italy and Ireland, European Commission chief Jose Manuel Barroso said Europe needed a continent-wide fiscal stimulus plan -- since "exceptional moments... need exceptional measures."
"We certainly need a fiscal stimulus plan for Europe but it cannot be a one-size-fits-all plan," he said at a press conference with British Prime Minister Gordon Brown in the aftermath of the G20 summit.
Barroso added that the measures should be "coordinated" to prevent "spill-over" from one country to another and would be unveiled on November 26.
The parlous state of the US auto industry was meanwhile threatening car manufacturers elsewhere.
AFP
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