: business

||| EU ECONOMY. Despite ongoing financial crisis

ECB holds rates steady

||| The ECB kept interest rates at a seven-year high Thursday to curb inflation, even
after the credit crunch forced governments to bail out banks and increased the likelihood of a recession. ||| ECB policymakers meeting in Frankfurt left the benchmark lending
rate at 4.25 percent.

Matt Moore | AP Business Writer
 

FRANKFURT, Germany – The European Central Bank discussed cutting interest rates, then left them unchanged even as bank President Jean-Claude Trichet delivered a somber assessment that euro zone growth is slipping amid high inflation and the spreading financial crisis.
Trichet told reporters that "economic activity in the euro zone is weakening. The economic outlook is subject to increased downside risks" – comments that led analysts to predict a rate cut is on the way.
He also said that the bank's governing council decided unanimously to leave its refinancing rate at 4.25 percent – but first weighed their choices. "We have examined two options. One, interest rates unchanged.
Another one, decreasing interest rates," Trichet told reporters after the announcement. "Our unanimous conclusion is that we were right in maintaining interest rates as they are. But we examined the two options."
Trichet said that the turmoil triggered by the subprime crisis that has plagued markets since last year and that exploded last month with the meltdown on Wall Street, figured prominently in talks about the interest rate.
"We discussed extensively the recent intensification of the financial market turmoil and its possible impact on economic activity and inflation, recognizing the extraordinary high level of uncertainty stemming from the latest developments," he said.
Trichet's comments helped push the euro to a nearly 14-month low against the dollar, dropping it $1.3745 before it edged higher to $1.3826. The last time it was lower was on July 10 when a euro bought $1.3714.
The concern, and Trichet's frank comments, left analysts convinced that the bank will have to make a move - soon. |||        

||| MARKETS. Triggered by dour data

The Street slips

Joe Bel Bruno | AP Business Writer

NEW YORK – U.S. stocks plunged after reports on declining factory orders and a seven-year high in jobless claims stoked fears that the U.S. government's financial rescue plan won't ward off a recession.
The Dow fell 348.22, or 3.22 percent, to 10,482.85, the S&P 500 index fell 46.78, or 4.03 percent, to 1,114.28, and the Nasdaq composite fell 92.68, or 4.48 percent, to 1,976.72.
Overseas, Japan's Nikkei stock average fell 1.88 percent. Britain's FTSE 100 fell 1.80 percent, Germany's DAX index fell 2.51 percent, and France's CAC-40 lost 2.25 percent.
In Latin America, Sao Paulo's Ibovespa slumped 7.4 percent to 46,098, Argentina's Merval dropped 5.7 percent to 1,514, Mexico's IPC index fell 4.3 percent to 24,027, Chile's IPSA was down 3.7 percent to 2,674, Colombia's IGBC slipped 0.9 percent to 9,214 and Venezuela's IBC fell 0.15. |||

||| FINANCIAL MELTDOWN. Banks get record $44.5 bln

Fed ups borrowing

Jeannine Aversa | AP Economics Writer

WASHINGTON – Banks and investment firms borrowed in record amounts from the Federal Reserve's emergency lending facility over the past week, providing fresh evidence of the credit stresses squeezing the country.
The Fed's report released on Thursday said commercial banks averaged a record $44.5 billion in daily borrowing over the past week.
That compared with a daily average of $39.36 billion in the previous week. On Wednesday alone, banks borrowed a record $49.5 billion, surpassing the previous high that came one day after the Sept. 11, 2001, terror attacks.
For the week ending Wednesday, investment firms drew a record $147.7 billion. That was up significantly from $88.15 billion in the previous week.
The Fed report also showed that $122.1 billion worth of loans were made to money market mutual funds. |||

Paris Motor Show opens its doors

Emma Vandore | AP Business Writer

PARIS – The Paris Motor Show had both room and gloom as it opened on Thursday under the cloud of global financial turmoil.
Automakers made bold sales predictions, but unveiled smaller and more fuel-efficient cars to cater to consumers who are both cash-strapped and environmentally conscious.
Honda unveiled a new five-door gasoline-electric hatchback to challenge rival Toyota Motor Corp.'s success with the hybrid Prius. Honda said its Insight would be cheaper "than any other hybrid car on the market," to make the low-emission technology affordable for more consumers. The Japanese automaker aims to sell 200,000 of the cars each year, launching next spring in Japan, Europe and North America.
Renault showed off a revamped Megane compact hatchback.
France's second-largest automaker, which is cutting 6,000 jobs to maintain profitability, hopes the car will make up for poor sales of the low-cost Laguna.
The shaky economic outlook cast a pall over the glitz. "It's not good," Volkswagen CEO Martin Winterkorn said of the financial climate.
"We don't know if we are at the start of the end or the end of the start," said Renault CEO Carlos Ghosn, who estimated that the global economic slump could last as long as two years, denting auto sales.