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TOPWRAP 1-Obama seeks bailout funds amid corporate gloom

Tue, Jan 13 2009, 04:26 GMT
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By Jeremy Pelofsky and Kentaro Hamada

WASHINGTON/TOKYO, Jan 13 (Reuters) - U.S. President-elect Barack Obama sought the remaining half of $700 billion in financial bailout funds from Congress, as sinking corporate earnings underlined the depth of the gathering recession.

Aluminium producer Alcoa Inc. kicked off the Wall Street earnings season with a wider-than-expected quarterly loss and a source said Sony Corp was expected to post its first operating loss in 14 years this business year.

As politicians worldwide try to alleviate sharply slowing growth and mounting job losses, Obama said he had asked President George W. Bush to formally request the remaining bailout funds so they could be ready when he takes office on Jan. 20.

"I felt that it would be irresponsible for me, with the first $350 billion already spent, to enter into the administration without any potential ammunition should there be some sort of emergency or a weakening of the financial system," Obama said.

The $700 billion rescue programme was approved last October to bolster the financial industry plagued by bad mortgage debts that pushed several major institutions to the brink of collapse.

CORPORATE LOSSES

Sony shares fell 8 percent on media reports of its likely loss. A source close to the matter told Reuters the maker of Bravia flat TVs and Playstation 3 video game consoles may post an operating loss of about $1.1 billion for the year to end-March.

The news came as Alcoa, which is slashing 15,000 jobs, posted a net loss of $1.19 billion for the fourth quarter on lower demand and declining metal prices.

"The aluminum industry was caught up in a perfect storm ... prices have never fallen so fast," President and Chief Executive Officer Klaus Kleinfeld told analysts.

In South Korea, the country's No. 5 automaker Ssangyong Motor Co said it had suspended production at all of its factories as some suppliers stopped delivering parts worried whether they will get paid by the company, which fights to avoid bankruptcy.

Earlier Citigroup shares had fallen 17 percent after a Wall Street Journal report the bank might post a quarterly operating loss of at least $10 billion.

The corporate gloom took its toll on equity markets, with Asian indexes following U.S. stocks lower. Tokyo's Nikkei , which had been closed for a holiday on Monday, fell more than 4 percent.

A record rise in Japanese bank lending in December only added to the gloom. Hardly a sign of any business upturn, the data was a sign that companies struggled to raise cash in the commercial paper and bond markets as they used to and were forced to borrow directly from banks.

BLEAK OUTLOOK

Most of the world's developed economies are already officially in recession and the outlook for 2009 is bleak.

The world's top central bankers, meeting in Switzerland on Monday, said the major economies were expected to shrink this year but would recover in 2010.

The OECD, meanwhile, said its leading indicator for the Group of Seven big industrial nations fell, pointing to "deep slowdowns in the major seven economies and in major non-OECD member economies, particularly China, India and Russia."

In Britain a trio of surveys on Tuesday suggested the economy had entered its deepest recession since at least the 1980s.

A survey by the British Retail Consortium showed sales fell at their fastest pace for a month of December since records began 14 years ago, while a Royal Institute of Chartered Surveyors report showed the housing market at a virtual standstill.

The British Chamber of Commerce said its quarterly survey of almost 6,000 firms revealed businesses facing their toughest conditions in more than two decades.

"These are truly awful results with the scale and speed of the economic decline happening at an unprecedented rate," said director general David Frost. "Since October, things have really fallen off a cliff."

In yet another sign of the toll being extracted by on government finances by the economic crisis, ratings agency Standard and Poor's warned of a possible downgrade to New Zealand's foreign-currency debt.

(Additional reporting by Jeff Mason in Washington, Steve James in New York; Writing by Alex Richardson; Editing by Tomasz Janowski) Keywords: FINANCIAL/

(Reuters Messaging: alex.richardson.reuters.com@reuters.net; email: alex.richardson@thomsonreuters.com; +65 6870 4682)

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