Obama Urges Action on Stimulus as Job Losses Mount

U.S. President Barack Obama urged action on a $900 billion stimulus bill before Congress to stave off "catastrophe", as a surge in the number of new jobless benefit claims pointed to an economy in deep recession.

CNBC.com President Barack Obama

Hopes that the Obama administration will make new moves to shore up the battered financial system boosted Asian stocks on Friday, but the prospects of more grim jobs data from the United States later in the day pushed the dollar lower.

In Australia, one of the few developed nations not officially in recession, the central bank, in a major downgrade, predicted the economy would barely grow at all in 2009.

The U.S. Senate was due to resume debate on the stimulus plan on Friday, after abruptly calling a halt to a drive to forge a bipartisan agreement on Thursday night, and Majority Leader Harry Reid said he was "cautiously optimistic" of it passing.

"If we do not move swiftly to sign the American Recovery and Reinvestment Act into law, an economy that is already in crisis will be faced with catastrophe," Obama said during a meeting with lawmakers from his Democratic Party in Virginia.

Rate Cuts

A financial crisis that began with a collapse in risky U.S. home loans, devastating the banking sector, has pushed the United States, the euro zone, Britain and Japan into recession.

Central banks worldwide have cut interest rates sharply to stimulate demand after mass layoffs and factory closures, with the Federal Reserve and Bank of Japan pushing rates to near zero in recent months.

In the latest cut, the Bank of England slashed its benchmark rate by half a percentage point to 1.0 percent on Thursday, the lowest since the central bank was created more than three centuries ago.

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"The global economy is in the throes of a severe and synchronized downturn," the central bank said in a statement.

Underlining the economic fallout of the crisis, the number of Americans filing for first-time unemployment benefits last week hit its highest level since late 1982.

Later on Friday, the U.S. government's payroll report, the most comprehensive data on unemployment, may show the economy shed as many as 525,000 jobs in January.

"It's pretty ugly," Boris Schlossberg, director of currency research at GFT Forex in New York, said after the U.S. job benefits figures were released on Thursday, adding that it "goes to show that the economy is convulsing and contracting".

Bank of Japan Governor Masaaki Shirakawa also acknowledged the pressures on the world's second-biggest economy, saying on Friday that the last three months had seen exports falling rapidly and corporate financing conditions tightening.

"We see economic conditions as being very severe," Shirakawa told a parliamentary budget committee.
     
Corporate Profits

Although not in recession, the Reserve Bank of Australia said on Friday the Australian economy would barely grow in 2009 with a rise in gross domestic product of just 0.5 percent. That marks a sharp cut from 1.75 percent predicted in November.

It said unemployment was likely to rise significantly from the current 4.5 percent level, which is well below the 6.5 percent average for the 30-nation Organisation for Economic Co-operation and Development.

The financial crisis, the most severe since the 1930s, has hammered corporate profits, with Rupert Murdoch's News Corp [NWS  Loading...      ()   ] the latest firm to report a big loss as it took an $8.4 billion writedown on the value of its Dow Jones acquisition, broadcasting licences and other assets.

"It is the worst global economic crisis since News Corp was formed 50 years ago," Murdoch, chairman and chief executive, said on a conference call with analysts after the company posted its biggest ever quarterly net loss.

Toyota Motor , the world's biggest auto maker, is due to report quarterly results later on Friday in which it is expected to flag much heavier full-year losses than it forecast just six weeks ago.

Ahead of the results, Moody's Investors cut its credit rating on Toyota for the first time in a decade by one notch, affecting $19 billion in long-term debt.

Despite the corporate pain, Asian stocks rose on Friday. Japan's Nikkei 225 Average was sharply higher, as investors focused on the U.S. stimulus package and other efforts to cleanse financial institutions of toxic assets.

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"Expectations for some fresh development in the U.S. economic measures next week, including the establishment of a 'bad bank' scheme, and a weaker yen are encouraging investors to pick up stocks," said Fumiyuki Nakanishi, manager at SMBC Friend Securities in Tokyo.

The Obama administration is due to announce its bank rescue plan next week.

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