A look at economic developments around the globe

A look at economic developments and activity in stock markets around the world Monday

TOKYO -- Japanese shares, already among Asia's worst performing this year, fell sharply to a 26-year closing low on the news that the world's second-largest economy posted a record current-account deficit in January. Japan's Nikkei 225 stock average fell 87.07 points, or 1.2 percent, to 7,086.03. The government said Japan's current account deficit stood at a record 172.8 billion yen ($1.8 billion) in January, far bigger than the previous deficit record of 25.6 billion yen in January 1996. The current account is Japan's broadest measure of trade in goods and services with the rest of the world. The government cited a 46.3 percent plunge in exports due to the deteriorating global economy. Imports fell 31.7 percent.

LONDON -- The Bank of England can control the threat of inflation generated by its radical new policy of creating money, the bank's deputy governor said. Britain's central bank announced a 75 billion pound ($103.6 billion) plan last week to buy assets, such as government securities and corporate bonds, over three months and pay for them by crediting banks' reserve accounts -- effectively creating new money. The bank's deputy governor for monetary policy, Charles Bean, said the move may lead to a rise in inflation in normal times, but that it was needed for economic recovery. He said the bank would watch the effect it had on spending.

Meanwhile, the British government over the weekend confirmed that it was taking a majority stake in Lloyds Banking Group PLC in exchange for insuring potentially more than 260 billion pounds ($367 billion dollars) of shaky assets. The bank's shares tumbled 10 percent at one stage before ending up nearly 5 percent higher. Barclays PLC was the worst-performing British banking stock, closing 5 percent down on fears that it may have to give up a stake to the government in return for participating in the insurance plan. The FTSE 100 index of leading British shares rose 0.3 percent.

BEIJING -- Shanghai's benchmark dropped 3.4 percent, while Hong Kong's Hang Seng tumbled 4.8 percent on the coattails of British bank HSBC Holdings PLC. HSBC, which trades in London and Hong Kong, has gone into a tailspin since announcing last week that it would raise $17.7 billion through a rights issue meant to shore up the company's capital position without resorting to government handouts. Elsewhere in Asia, stock measures in India, Singapore and Taiwan also fell. However, those in South Korea and Australia gained 1.6 percent and 0.3 percent respectively.

BERLIN -- The European Central Bank has the room to cut interest rates again from current record lows but the onus to stabilize the global economy now rests more with governments, regulators and the financial industry, executive board member Juergen Stark said. Stark said in the text of a speech delivered in Luxembourg that the European Central Bank could "in principle" cut rates further to ease credit conditions in the 16 nations that share the euro, but stressed that further rate cuts would not fundamentally solve the problems that caused the financial crisis. He warned that if maintained for too long a time, low interest rates could weaken the incentives for banks to clean up their balance sheets and monitor their credit risk carefully -- reinforcing the very problems that currently impair the functioning of the financial system. In addition, Stark said too low interest rates tend to foster lending to unprofitable businesses, thereby harming the growth potential of the euro zone economy, and could fuel another asset price bubble. Germany's DAX rose 25.62 points, or 0.7 percent, to 3,692.03. In Paris, the CAC-40 fell 15.16 points, or 0.6 percent, to 2,519.29.

BRUSSELS -- European Union finance ministers are expected to endorse calls to double the funding of the International Monetary Fund to $500 billion at talks Tuesday. The ministers are to back a paper on what position the 27-nation bloc will take in overhauling international financial institutions at talks ahead of a Group of 20 talks later this week in London. Their paper, a copy of which was obtained by the Associated Press, calls for more powers for the IMF and a doubling its current budget.

Meanwhile, the European Investment Bank said it is unlikely to lend more than euro7 billion ($8.9 billion) to Europe's ailing carmakers, despite increased pressure by auto companies. EIB's President Philippe Maystadt said the planned loans to the car sector would already amount to 10 percent of the bank's borrowing plans this year and would be capped. Car industry executives have been calling for more state loans and government incentives in recent weeks as sales continue to fall. Maystadt said the bank was already increasing its total lending plans for 2009 amid requests from EU governments to provide more credit to smaller businesses as they struggle to make ends meet.

MANILA, Philippines -- The global financial crisis wiped a staggering $50 trillion off the value of financial assets last year including $9.6 trillion of losses in developing Asia alone, the Asian Development Bank said. The study commissioned by the Manila-based lender on the impact of the financial crisis on emerging economies said developing Asia -- losing the equivalent of just over one year's worth of gross domestic product -- was hit harder than other emerging economies because the region has expanded much more rapidly. In Latin America, losses were estimated at $2.1 trillion. There were no comparable figures for other regions.


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