The Death of Heath Ledger

The actor Heath Ledger was found dead Tuesday afternoon in an apartment in Manhattan, according to the New York City police. Some signs pointed to an accidental overdose or a suicide, although no note was found, police sources said. Mr. Ledger was 28.

At 3:31 p.m., according to the police, a masseuse arrived at the fourth-floor apartment of the building, at 421 Broome Street, between Crosby and Lafayette Streets in SoHo, for an appointment with Mr. Ledger. The masseuse was let in to the home by a housekeeper, who then knocked on the door of the bedroom Mr. Ledger was in. When no one answered, the housekeeper and the masseuse opened the bedroom and found Mr. Ledger naked and unconscious on a bed, with sleeping pills — both prescription medication and nonprescription — on a night table. They attempted to revive him, but he did not respond. They immediately called the authorities. As the news reports spread quickly, throngs of people gathered in the neighborhood.

The police said they did not suspect a crime. Ellen Borakove, a spokeswoman for the office of the city’s chief medical examiner, Dr. Charles S. Hirsch, said that employees of the office were at the apartment and that an autopsy would be conducted on Wednesday. Around 6:30 p.m., city workers rolled Mr. Ledger’s body, in a black body bag on a stretcher, out of the building.

(At first, Paul J. Browne, the Police Department’s deputy commissioner for public information, said that the apartment was owned by the actress Mary-Kate Olsen, but later reversed himself and said that was not the case. In a phone interview, Annette Wolf, a representative of Ms. Olsen, said, “It is not her apartment,” adding, “She does not own the apartment. She has never owned the apartment. She and her sister have an apartment in New York City but they are not in this building.” An earlier version of this article reported the erroneous detail from the police.)

Heathcliff Andrew Ledger was born on April 4, 1979, to Sally Ledger, a French teacher, and Kim Ledger, an engineer. Named for a character in Emily Brontë’s “Wuthering Heights,” he and his older sister, Katherine, grew up in Perth, Australia; his parents were divorced when he was about 10. As a student, he joined a local theater company and appeared in a production of “Peter Pan,” which led to his being cast in children’s television programs.

Mr. Ledger’s first Hollywood film was the teenage romantic comedy “10 Things I Hate About You” (1999). He later appeared in romantic-hero roles in films like “A Knight’s Tale” (2001) and “Casanova” (2005).

But the role for which Mr. Ledger was probably best known by American audiences was in “Brokeback Mountain” (2005). The film, based on a short story by Annie Proulx about two cowboys who fall in love, won critical acclaim. Reviewing the film in The New York Times, the critic Stephen Holden wrote, “Mr. Ledger magically and mysteriously disappears beneath the skin of his lean, sinewy character. It is a great screen performance, as good as the best of Marlon Brando and Sean Penn.” Mr. Ledger was nominated for an Oscar for Best Actor in January 2006. (His death came on the same day that the 2007 Oscar nominations were announced.)

Mr. Ledger met the actress Michelle Williams while filming ‘’Brokeback Mountain.” They became romantically involved and moved to Boerum Hill, Brooklyn, where their comings and goings were widely noted by the celebrity press. They had a daughter, Matilda Rose, who was born on Oct. 28, 2005. The couple separated last year.

In an interview in London for an article published in November, Mr. Ledger told The Times, ‘’I feel like I’m wasting time if I repeat myself.” He said in the interview that he was not proud of his latest role, in Todd Haynes’s “I’m Not There,” in which Mr. Ledger was one of a half-dozen actors depicting the musician Bob Dylan. ‘’I feel the same way about everything I do. The day I say, ‘It’s good’ is the day I should start doing something else,” he said in the interview.

Mr. Ledger had been cast as the Joker in the latest Batman installment, “The Dark Knight,” set to be released this summer.

As news of Mr. Ledger’s death made its way across the Internet, the Police Department issued a fairly terse summary of the death: “On Tuesday, 01/22/08, at approximately 1530 hours, in the confines of the 5 precinct, police responded to 421 Broome Street and found a M/W/28 unconscious. The victim was pronounced DOA at the scene. M.E.’s office to determine the cause of death. Investigation continues.”

Calls by The Times to Mara Buxbaum, a publicist for Mr. Ledger, and Steve Alexander, the actor’s agent, were not immediately returned.

The building at 421 Broome Street was sold for $4.8 million in 1999 by Ho Hwa Properties Inc. to Red Tulip, L.L.C. Calls to a phone number listed for Junia Hissa Neiva, a Brazilian painter who is listed as an owner of Red Tulip and of the building, went to an answering machine that was full and could not accept new messages.

Julie McIntosh, a hair stylist in a SoHo salon a few doors down from the apartment building, said this afternoon that she used to see Mr. Ledger once or twice a week and had twice seen him going on walks with his young daughter. “I think it’s really sad,” Ms. McIntosh said. “He’s a really nice guy. He seemed happy.” A month ago, she said, she chatted with Mr. Ledger in front of the salon and jokingly asked him, “When are you going to come in and let me wash your hair?” Ms. McIntosh said she believed Mr. Ledger had been living in the area for several months. “He always said hello,” she said.

Outside Ms. Williams’s house in Boerum Hill, Brooklyn, this evening, residents expressed shock at Mr. Ledger’s death. Elliott Puckett, an artist who lives in neighborhood, said, “That’s terrible. I used to see them with their dry cleaning and their baby. It’s really sad.”

Emily Ekman, a student who lives in Boerum Hill, said, “I knew Michelle. I’m blown away. I hope she’s O.K. She must be really upset.”

Elise Harris, who lived across the street from Ms. Williams and Mr. Ledger, said, “I’d met them. They were very nice, with their daughter. I think shock is the reaction. I didn’t even know he was on drugs, but that’s the kind of thing you don’t know unless you are in that circle. He was a nice guy, attractive, very friendly.”

A block away, at the Brooklyn Inn, the manager, Jason Furlani, said, “Obviously we’re shocked that it happened. We knew that he was in the neighborhood. I saw him around with his wife and daughter in the neighborhood, just normal folks. It’s a tragedy.”

US economy: Tough call for Fed

The US is in an exceptionally difficult situation, with the economy on the brink of recession and limited scope for policymakers to ride to the rescue.

To some analysts it looks like payback time after a decade in which the US lived beyond its means with the help of generous foreign creditors and a booming housing market.

That view ignores the essential role the US played in supporting global growth for much of the 2000s.

But there is no doubt that the US is in double trouble today because of the excesses of the past and the vulnerabilities associated with global economic imbalances.

The collapse of the twin bubbles in the housing and credit markets is a massive shock for the US economy and one that would be difficult to manage in the most favourable of circumstances.

The US has endured financial market crises before but this turmoil reflects and magnifies a far-reaching development: the sharp reversal in US house prices.

The dual deflation - of housing and housing-related assets - has already devastated home construction and is now threatening to sap consumer spending and erode the lending capacity of the banking system.

Meanwhile dysfunction in the financial system through which monetary policy operates has limited the stimulative effect of interest rate cuts by the Federal Reserve.

The twin bubbles and global imbalances are related, as Robert Dugger of Tudor Investments has argued. The US manufactured hundreds of billions of dollars of securities to sell to foreigners in order to finance its giant current account deficit.

Meanwhile the downward pressure of excess savings outside the US on government bond yields induced investors of all kinds to seek ways to boost yield, compressing risk premiums to unsustainably low levels and - among other things - fuelling the subprime mortgage market.

Now the housing/credit market bust is moderating the current account imbalance - and the savings/investment balance that is its counterpart.

But as Martin Feldstein, a professor at Harvard, says, it is happening "through a reduction in investment primarily in housing rather than an increase in saving".

A substantial fall in the dollar was required to deliver the external adjustment that has taken place so far: economists differ as to whether more will be needed.

On the plus side, world growth remains strong, providing a much-needed lifeline for the US. Net exports should continue to lend some support to US growth in the coming quarters, though not as much as in the middle of 2007.

On the minus side, the Fed - like other central banks - has to cope with the risks to inflation from the oil price shock caused by surging demand for energy in China, India and the rest of the emerging economies.

The still very large current account deficit makes the Fed balancing act vastly more difficult. With little scope to inflate more asset bubbles at home, one of the main ways in which monetary policy works is through the dollar and net exports.

The significant decline in the dollar since the credit squeeze began is not an accident - the Fed needed the dollar to fall to stimulate the US economy.

But the US central bank's ability to cut rates aggressively is limited by the structural vulnerability of the dollar arising from the external deficit.

Indeed, the events of the past year or so constitute close to a perfect storm for the dollar, with a deterioration in both US short-term and long-term growth prospects, declining interest rates on US assets and a shock to confidence in the transparency and liquidity of US financial markets.

Excessive rate cuts could push oil up further and unleash inflation expectations when US headline inflation is high and core inflation creeping up.

The Fed is widely criticised in the financial markets for being behind the curve on monetary policy. But with inflation consistently above the Fed's implicit target, a large external deficit and a vulnerable currency, the Fed was almost obliged to stay a fraction to the hawkish side of the market. The Fed now appears to be throwing caution to the wind and adopting a more aggressive stance on rate cuts.

This holds out some promise for growth, but brings the risks to inflation and the dollar closer. Ben Bernanke, Fed chairman, is presumably betting that recession fear will tamp down price and wage pressure. But if inflation expectations start to move up, the Fed will be in a real bind.

Meanwhile the Fed's dilemma explains why so many top economists in the US are now advocating a fiscal stimulus to bypass the financial system, boost spending, and take some of the pressure off the central bank and monetary policy.

Such a stimulus now looks likely. The question is whether it will come in time to do any good. A fiscal stimulus will reduce US national savings further, and put upward pressure on the current account deficit, though not dollar for dollar.

From the US point of view what might be even more helpful would be stimulus - monetary and fiscal - in the rest of the world.

Asian stocks rebound after Fed rate cut

Asian stocks rebounded on Wednesday after the US Federal Reserve slashed interest rates by 75 basis points - and hinted clearly at more cuts to come - in a bid to arrest the deterioration in the US economy and stem a wave of selling in world stock markets.

In Asia on Wednesday, the MSCI Asia Pacific Index added 2.7 per cent to 135.64 in morning trading in Tokyo, headed for its biggest gain since September 19.

Hong Kong shares raced up 7 per cent at the open, and Shanghai was up almost 2 per cent in the opening minutes of trade. Japan's Nikkei 225 Stock Average surged 3.4 per cent by midsession. Australia's S&P/ASX 200 Index was up 5.3 per cent by early afternoon, halting a 12-session losing run.

The move down to 3.5 per cent was the first unscheduled Fed rate cut since September 17 2001, and its largest single cut since August 1982. The central bank's gambit prompted a rebound in European stocks on Tuesday but did not prevent the S&P 500 from closing lower.

The tabular content relating to this article is not available to view. Apologies in advance for the inconvenience caused.

The Fed had been planning to cut rates aggressively at its scheduled meeting on January 30, amid growing concern that it was behind the curve on monetary policy. But the global sell-off in world stock markets in recent days convinced Fed officials that they could not afford to wait another nine days.

In a statement, the US central bank said "appreciable downside risks remain" - a clear signal that it intends to lower rates again, with another cut likely on January 30.

Peter Hooper, chief economist at Deutsche Bank Securities, said the Fed's move was "unprecedented".

However, Jim O'Neil, chief economist at Goldman Sachs, said the US central bank would have to follow up with a 50 basis point cut on January 30 if it wanted to be "material" and "ahead of the curve".

World markets welcomed the Fed move on Tuesday. In London, the FTSE 100 was up 2.9 per cent, having initially fallen 240 points - 4.3 per cent - at the start of Tuesday's trading. The FTSE Eurofirst 300 was up 2.1 per cent, while Frankfurt's Xetra Dax gained 0.1 per cent and in Paris the CAC 40 was up 2.1 per cent.

Wall Street, which was closed during Monday's global equity rout, fell nearly 4 per cent in early trading as an avalanche of sell orders initially overwhelmed the Fed's move. However, the S&P 500 recovered to close 1.1 per cent lower at 1,310.50

The emergency Fed action represents an urgent effort by the US central bank to get to grips with the rapidly worsening economic outlook. It follows a sudden spate of bad economic data that wrong-footed the Fed and suggested the US might be sliding into recession.

Officials decided on their move at a video conference at 6pm US time on Monday, with one policymaker - Bill Poole, president of the St Louis Fed - dissenting.

In its statement, the Fed said it acted "in view of a weakening of the economic outlook and increased downside risks to growth".

Ken Lewis, chief executive of Bank of America, said the Fed move "gives us a much better chance of avoiding recession".

The yield on the US Treasury two-year note fell 33 basis points to 2.01 per cent, while the inflation compensation on inflation-protected securities edged up.

Fed slashes rates to halt sell-off

The US Federal Reserve slashed interest rates by 75 basis points on Tuesday - and hinted clearly at more cuts to come - in a bid to arrest the deterioration in the US economy and stem a wave of selling in world stock markets.

The move down to 3.5 per cent was the first unscheduled Fed rate cut since September 17 2001, and its largest single cut since August 1982. The central bank's gambit prompted a rebound in European stocks on Tuesday and in Asia early on Wednesday but, while it helped arrest the slide on Wall Street, it did not prevent the S&P 500 from closing lower.

The tabular content relating to this article is not available to view. Apologies in advance for the inconvenience caused.

The Fed had been planning to cut rates aggressively at its scheduled meeting on January 30, amid growing concern that it was behind the curve on monetary policy. But the global sell-off in world stock markets in recent days convinced Fed officials that they could not afford to wait another nine days.

In a statement, the US central bank said "appreciable downside risks remain" - a clear signal that it intends to lower rates again, with another cut likely on January 30.

Peter Hooper, chief economist at Deutsche Bank Securities, said the Fed's move was "unprecedented".

However, Jim O'Neil, chief economist at Goldman Sachs, said the US central bank would have to follow up with a 50 basis point cut on January 30 if it wanted to be "material" and "ahead of the curve".

The cut came after a second day of heavy losses in the Asian markets. Japan's Nikkei 225 index accumulated its worst two-day decline in nearly two decades, losing more than 5 per cent yesterday. Shanghai closed down 7.2 per cent; Hong Kong fell 8.7 per cent and Mumbai 5 per cent.

Markets welcomed the Fed move. In London, the FTSE 100 was up 2.9 per cent, having initially fallen 240 points - 4.3 per cent - at the start of Tuesday's trading. The FTSE Eurofirst 300 was up 2.1 per cent, while Frankfurt's Xetra Dax gained 0.1 per cent and in Paris the CAC 40 was up 2.1 per cent.

Wall Street, which was closed during Monday's global equity rout, fell nearly 4 per cent in early trading as an avalanche of sell orders initially overwhelmed the Fed's move. However, the S&P 500 recovered to close 1.1 per cent lower at 1,310.50

Japan's Nikkei 225 surged 3 per cent in early morning trading on Wednesday, while Korea's Kospi index was 2.7 per cent higher. The Hong Kong Monetary Authority followed the Fed's move and cut its base rate by 75 basis points to 5 per cent.

The emergency Fed action represents an urgent effort by the US central bank to get to grips with the rapidly worsening economic outlook. It follows a sudden spate of bad economic data that wrongfooted the Fed and suggested the US might be sliding into recession.

Officials decided on their move at a video conference at 6pm US time on Monday, with one policymaker - Bill Poole, president of the St Louis Fed - dissenting.

In its statement, the Fed said it acted "in view of a weakening of the economic outlook and increased downside risks to growth".

Ken Lewis, chief executive of Bank of America, said the Fed move "gives us a much better chance of avoiding recession".

The yield on the US Treasury two-year note fell 33 basis points to 2.01 per cent, while the inflation compensation on inflation-protected securities edged up.

US moves to avert economic meltdown

WASHINGTON - Jolted by global recession fears, the Federal Reserve slashed interest rates Tuesday, and President Bush and leaders of Congress joined in a rare show of cooperation in promising urgent action to pump up the economy with upwards of $150 billion in tax cuts and government spending.

Market meltdowns overnight around the globe and growing anxiety at home stirred lawmakers and the administration toward swift action, possibly within a few weeks. Wall Street plummeted as the day began, following Asian stocks, then warily eased its sell-off after the Fed ordered the biggest cut on record in a key interest rate. The Dow Jones industrials, down 465 points at one point, closed the day off 128.

The Fed, announcing its action after an emergency video conference Monday night, indicated further rate reductions were likely, aimed at encouraging people and companies to start spending again.

"The urgency that we feel at home is now even more urgent as we see the impact of our markets on others," House Speaker Nancy Pelosi said after both Democratic and Republican lawmakers met with Bush at the White House.

Senate Majority Leader Harry Reid said the goal was to get a deal through Congress and on Bush's desk within roughly three weeks — lightning speed compared with the usual snail's pace on Capitol Hill. His Republican counterpart, Mitch McConnell of Kentucky, agreed the aim was action in the next few weeks and said, "That, by the standards in Congress, is pretty fast."

Bush expressed confidence that he and the Democratic-led Congress could put aside bitter differences that have marked his presidency.

"I believe we can find common ground to get something done that's big enough, effective enough so that an economy that is inherently strong gets a boost — to make sure that this uncertainty doesn't translate into more economic woes for our workers and small business people," Bush said in the Cabinet Room.

Later, announcing the creation of a panel to educate people about their finances, Bush said he thought there would be an agreement "in relatively short order."

The White House meeting was intended to show the world that Bush and his Democratic adversaries recognize the gravity of the economic slowdown and are serious about protecting consumers and investors who have watched their holdings shrink. Wall Street and global markets fear the stimulus package outlined by Bush is not enough to avert a recession. The Dow Jones industrial average is down nearly 10 percent since the beginning of the year — its worst first 14 trading days ever.

Official Washington was accentuating the positive.

"I really feel good that we have an opportunity to do something together," Reid said, standing in the White House driveway with Pelosi after talking with Bush. Reid said the size of a deal suggested by Bush was "a good number."

Administration officials are focusing on rebates of $800 to $1,600 for individuals and couples and so-called bonus depreciation to allow companies to deduct 50 percent of business investments made this year. Democrats say the package also should include boosts in unemployment benefits, food stamp payments and the Medicaid health care program for the poor and disabled. Talks between Pelosi and Minority Leader John Boehner, R-Ohio, have focused on smaller tax rebates of perhaps $500 for individuals.

Like Bush, lawmakers would not discuss what a compromise plan would look like, stressing cooperation rather than potential differences over details.

"This is about one thing in this package: Is it a stimulus?" Pelosi said "So whatever it is that we are considering, it must meet that one criterion: Does it stimulate the economy? Does it put money into the hands of those who will spend it?"

When the Democratic leaders were asked if they agreed with Bush's statement that the economy is inherently strong, Pelosi said, "I certainly hope so."

Reid said the House would pass a package first and send it to the Senate. Pelosi, Boehner and Treasury Secretary Henry Paulson planned to talk over breakfast Wednesday.

Paulson went to Capitol Hill for talks on the ingredients of the economic package. "Time is of the essence and the president stands ready to work on a bipartisan basis to enact economic growth legislation as soon as possible," he said earlier in a speech at the U.S. Chamber of Commerce.

Many analysts say the United States already has tumbled into a recession — a notion rejected by the White House. "We are not forecasting a recession," spokeswoman Dana Perino said. "Clearly there is a slowdown."

Leaving open the possibility of a bigger stimulus package, she said, "I'm not going to close the door but I'm not suggesting that anyone believes it has to be bigger" than the roughly $150 billion figure already discussed. Later, she said the White House has not "seen higher numbers floated by members of Congress" and that Bush believes the package he has outlined is "the right amount."

The Fed's rate cut caught Washington by surprise. Federal Reserve Chairman Ben Bernanke and his colleagues approved the cut Monday night after global markets were slammed by rising concerns that weakness in the world's largest economy was spreading worldwide.

"The world's stock markets are in meltdown, so the Fed came in with an inter-meeting move to try to stop the panic," said Christopher Rupkey, senior economist at Bank of Tokyo-Mitsubishi.

The reduction in the federal funds rate from 4.25 percent to 3.5 percent marked the biggest reduction in this target rate for overnight loans on records going back to 1990. It marked the first time the Fed has changed rates between meetings since 2001, when the central bank was battling the combined impacts of a recession and the terrorist attacks.

Commercial banks responded by announcing similar cuts of three-quarter of a percent in their prime lending rate, the benchmark for millions of business and consumer loans. The action will mean the prime lending rate will drop from 7.25 percent down to 6.50 percent.

Analysts said the fact that the Fed did not wait until its meeting next week to cut rates underscored the seriousness of the situation. The Fed was expected to cut rates further, possibly as soon as their next meeting on Jan. 29-30, if there are continued signs that the economy is weakening.

"This move by the Fed was essential," said Lyle Gramley, a former Fed governor who is now a senior analyst with the Stanford Financial Group in Washington. "Bernanke promised in a speech earlier this month to take substantive action in a timely and decisive manner."

Wall St down despite rally in financials

US stocks rebounded from their worst levels on Tuesday, but a Federal Reserve' rate cut, just a week before its official January meeting starts, failed to arrest pessimism about the US economy and corporate earnings.

About an hour before the opening, policymakers announced a rate cut of 75 basis points, slicing the Fed funds rate to 3.5 per cent. Initially, the move caused S&P stock futures to jump, but the market opened sharply lower.

"The Fed did what they had to do, but it is only part of the solution and more rate cuts are likely," said William Strazzullo, chief market strategist at Bell Curve Trading.

After being closed on Monday for the Martin Luther King holiday, stocks extended their big losses from last week and have now fallen for the past five days.

Traders said an avalanche of sell orders had overwhelmed the stimulus of the Fed's rate cut.

After the S&P 500 initially fell 3.8 per cent, it then pared losses in choppy trade, led by a strong rally in financials, but the benchmark could not turn positive.

At the close of trade the S&P 500 was down 1.1 per cent at 1,310.50 and has now fallen nearly 11 per cent this month.

Equity volatility, as measured by the Vix index, surged 38 per cent to 37.57 and eclipsed the peak set in August when credit and mortgage problems took their toll on the banking sector and the broad market. The Vix closed up 14.2 per cent at 31.04.

The rate cuts and the prospect of more to come sparked a rebound in financial shares, with the S&P sector up 2.2 per cent, although it remains lower by about 11 per cent since the start of the year.

Apart from financials and consumer discretionary, up 1.3 per cent, the rest of the big sectors in the S&P were lower, led by a 3.4 per cent fall in utilities and a 3.2 per cent slide in healthcare stocks, which had been a refuge from selling pressure in recent weeks.

The S&P technology sector fell 3.1 per cent and is down more than 20 per cent from its high of October, meeting the definition of a bear market.

The Nasdaq Composite closed 2 per cent lower at 2,292.27, and has fallen nearly 20 per cent from its high of last year.

Shares in Ebay fell 4.2 per cent to $27.13 after a report said Meg Whitman, the auctioneer's chief executive, was preparing to retire.

The mood in tech was hurt further after the closing bell when Apple reported a 57 per cent jump in first-quarter profit, but lowered its outlook. The stock fell more than 10 per cent in post-market trade.

In spite of the sharp falls, some analysts said the time for the strategic buying of selected stocks loomed.

"It makes sense for investors to consider increasing their exposure to equities into the sell-off, gingerly or aggressively, depending on their investment horizon," said Thomas McManus, chief investment strategist at Banc of America Securities.

Marc Pado, chief market strategist at Cantor Fitzgerald, said: "The question is recession and people are using the term loosely." He added: "Bond yields have been low for some time, while rate cuts and fiscal stimulus from the government will probably propel a strong rebound in the economy during the second half of 2008." Mr Pado said large-cap and growth stocks with exposure to the global economy should be favoured by investors at this time.

The blue-chip Dow Jones Industrial Average closed down 1.1 per cent at 11,971.19. Several blue chips announce their fourth-quarter results this week, led by Microsoft, AT&T, Caterpillar and Honeywell. Investors hope that positive results will help arrest the selling pressure on stocks.

Among the financials in the news was Bank of America (NYSE:BAC) after it said fourth-quarter net income fell to $268m as it reported trading losses of $5.44bn due in part to writedowns of collateralised debt obligations. After an early fall to $33.12, the stock rose 4 per cent to $37.41.

Wachovia (NYSE:WB) reported a 98 per cent fall in earnings as it wrote down $1.7bn and set aside $1.5bn to cover bad loans. The stock also re-bounded from negative territory and gained 3.9 per cent to $31.99.

Ambac reported a loss of $3.26bn after taking a $5.21bn writedown.Fitch Ratings cut the bond insurer to AA last week, a move that has sparked concerns that other financial institutions, which have used the insurer to cover positions, will mark down their portfolios. The stock rallied 27.1 per cent amid hopes it will receive a capital injection.

Shares in Dupont were up 0.4 per cent lower at $42.85, after the chemicals maker posted a quarerlly earings fall of 37 per cent from a year ago, when one-time items boosted results. Excluding those items, profit rose sharply buoyed by international sales.

UnitedHealth (NYSE:UNH) said quarterly earnings rose 3 per cent and it was 5.9 per cent lower at $51.22.

In other earnings, Johnson and Johnson said quarterly profits had risen 10 per cent, as the weak dollar boosted sales by 11 per cent. The stock fell 1.5 per cent to $65.27.

Fed slashes rates by 75 points

The US Federal Reserve slashed interest rates by 75 basis points on Tuesday - and hinted clearly at more cuts to come - in a bid to arrest the deterioration in the US economy and stem a wave of selling in world stock markets.

The tabular content relating to this article is not available to view. Apologies in advance for the inconvenience caused.

The move down to 3.5 per cent was the first unscheduled Fed rate cut since September 17 2001 and its largest single cut since August 1982.

The central bank's gambit prompted an immediate rebound in European stocks but, while it helped arrest the slide on Wall Street - which had been closed during Monday's global equity route - even this action could not prevent the S&P 500 from closing 1.11 per cent lower.

The Fed had been planning to cut rates aggressively at its scheduled meeting on January 30, amid growing concern that it was behind the curve on monetary policy. But the global sell-off in world stock markets in recent days convinced Fed officials that they could not afford to wait another nine days.

In a statement, the US central bank said "appreciable downside risks remain" - a clear signal that it intended to bring rates down. Many analysts now expect a cut of 50 basis points on January 30.

Peter Hooper, chief economist at Deutsche Bank Securities, said the Fed's move was "unprecedented in magnitude and proximity to the next meeting".

Markets welcomed the move. In London the FTSE 100 was up 2.9 per cent, having initially fallen 240 points - 4.3 per cent - at the start of Tuesday's trading. The FTSE Eurofirst 300 was up 2.1 per cent, while Frankfurt's Xetra Dax had risen 0.1 per cent and in Paris the CAC 40 was up 2.1 per cent.

The cut came after a second day of heavy losses in the Asian markets. Japan's Nikkei 225 index accumulated its worst two-day decline in nearly two decades, losing more than 5 per cent. Shanghai closed down 7.2 per cent; Hong Kong fell 8.7 per cent and Mumbai 5 per cent.

An avalanche of sell orders at the start of New York trading initially overwhelmed the Fed's move, with Wall Street plunging nearly 4 per cent on its opening. But stocks regained some losses.

The emergency Fed action follows a sudden spate of bad economic data spanning housing, the jobs market and retail sales, which wrongfooted the Fed and suggested the US might be sliding into recession.

Officials decided on their move at a video conference at 6pm eastern US time on Monday, with one policymaker - Bill Poole, the president of the St Louis Fed - dissenting.

In a statement, the Fed said that while strains in short-term money markets had eased, "broader financial conditions have continued to deteriorate and credit has tightened further for some businesses and households". New information also indicated a "deepening of the housing contraction" and "some softening in labour markets".

The Fed pledged to act in a "timely manner as needed".

Ken Lewis, chief executive of Bank of America, said the Fed move "gives us a much better chance of avoiding recession and I'm very pleased they did it".

Hank Paulson, the US Treasury secretary, said the move was "very constructive".

The yield on the interest-rate sensitive two-year US Treasury note was at 2.11 per cent after reaching a low of 1.99 per cent, its lowest level since April 2004.

Price of gold turns back towards $900

Gold prices rallied and other commodities posted small gains after the US Federal Reserve cut interest rates in an effort to prop up the weakening US economy.

Spot bullion in London jumped to $894.30 a troy ounce as the US dollar weakened against the euro after the Fed cut its main interest rate by 75 basis points to 3.5 per cent and said it was ready to take further action.

Anita Soni of Credit Suisse said: "Upward pressure on the price of gold is likely being driven by weakness of the US dollar fuelled by US rate cuts."

Before the central bank's action, gold prices had tumbled to a three-week low of $849.50 an ounce as traders took profits from the recent rally in precious metals.

Earlier this month, gold prices hit an all-time high of $914 an ounce.

Tuesday's price jump was also boosted by positive comments from investment banks Morgan Stanley and Credit Suisse which raised their forecasts for average gold prices in 2008 to $950 an ounce and above $1,000 an ounce in 2009.

Barclays Capital reiterated its positive view towards the metal, forecasting a test of the $1,000 an ounce level before the summer.

Suki Cooper, a precious metals analyst at Barclays Capital in London, said: "A significant number of positive external drivers such as a weak dollar, inflation concerns and slower US growth are set to support prices"

UBS, on the other hand, remained cautious and reiterated its one-month target of $850 an ounce for gold on the weakness of physical jewellery demand.

Other analysts also continue to be guarded as exchange-traded funds, the biggest driver of investment gold demand in recent years, last week suffered surprisingly large outflows.

Other commodity prices pared losses or moved into positive territory after heavy falls, triggered by fears that the US economic slowdown could spread to emerging economies such as China and India, which have been the main engines of fresh demand for raw materials.

But traders remained cautious and warned that base metals and energy commodities could come under further pressure as soon as the euphoria over interest rate cuts had faded away.

Opec offered the starkest warning of the dangers lying ahead, saying in its monthly report: "With mounting evidence of a slowdown in US economic growth . . . fears of a downright recession have multiplied."

Sales of commodities, particularly of agricultural raw materials, aimed at raising funds for investors seeking to offset losses in other markets, had also contributed to the price fall in early morning, traders said.

Robert Laughlin of MF Global in London said that the immediate risk for commodities was "a liquidation of open positions by some market participants in order to finance positions on other markets".

Crude oil prices were mixed, after falling to the lowest level in six weeks before the Fed's interest rate cut.

ICE March Brent closed 94 cents higher at $88.45 a barrel. It had declined to a low of $85.00 a barrel.

In New York, Nymex February West Texas Intermediate settled at $89.85 a barrel, a drop of 72 cents from Friday's close.

On the London Metal Exchange, base metals recovered from early losses. Copper rose 1.9 per cent to $7,010 per tonne.

Treasury rates fall

WASHINGTON - Interest rates on short-term Treasury bills fell in Tuesday's auction with rates on six-month bills dropping to the lowest level since late 2004.

The Treasury Department auctioned $21 billion in three-month bills at a discount rate of 2.370 percent, down from 3.080 percent last week. Another $19 billion in six-month bills was auctioned at a discount rate of 2.400 percent, down from 2.950 percent last week.

The three-month rate was the lowest since these bills averaged 2.320 percent on Jan. 24, 2005. The six-month rate was the lowest since these bills averaged 2.380 percent on Dec. 12, 2004.

The discount rates reflect that the bills sell for less than face value. For a $10,000 bill, the three-month price was $9,940.09 while a six-month bill sold for $9,878.67.

Separately, the Federal Reserve said Tuesday that the average yield for one-year Treasury bills, a popular index for making changes in adjustable rate mortgages, fell to 2.83 percent last week from 3.04 percent the previous week.

The normal Monday Treasury auction was held on Tuesday this week because of the Martin Luther King federal holiday.

Dollar weaker vs euro in volatile trade after Fed rate cut

LONDON (AFP) - The dollar was weaker against the euro Tuesday after the US central bank cut interest rates by an unprecedented three quarters of a point in an effort to keep the US economy out of recession.

Dealers said the dollar had a rollercoaster ride to match that of stocks as investors tried to get a fix on the US outlook amid growing worries the collapse of the US housing market will put the economy into reverse.

The US Federal Reserve said it cut its benchmark interest rate to 3.50 percent from 4.25 percent because of a "weakening of the economic outlook and increasing downside risks to growth."

There had been growing speculation the Fed would act before its scheduled end of the month meeting following Monday's rout on the Asian and European bourses but the move still surprised and caused some concern that the situation must be really bad to merit such a dramatic measure.

"The implications for the dollar are slightly complicated," said Derek Halpenny, senior currency economist at the Bank of Tokyo Mitsubishi UFJ.

"Risk aversion has in recent days come to the aid of the dollar ... however, further aggressive monetary easing will substantially erode any yield support for the dollar," Halpenny said.

"We suspect the current risk aversion support for the dollar will give way to the negative yield developments that are now more apparent after this inter-meeting cut," he added.

In late European deals, the euro was quoted at 1.4616 dollars, jumping off an early low of 1.4365 dollars and 1.4455 dollars in New York late on Monday.

Halpenny said the Fed's surprise move also raises the spectre of more bad news on the economic front, known to the Fed but not the markets.

"There will now be inevitable speculation that the Fed is in possession of specific information that has increased concerns over the fallout from the banking sector write-downs of mortgage-related securities."

Dealers said the markets will now be looking very closely for any signal that the Fed could cut interest rates again at the end of the month, or as seems more likely, sit back and assess the impact of Tuesday's action.

Elsewhere, the pound weakened against the euro as speculation grew that the Bank of England could follow suit with a cut of 50 basis points, rather than 25 points to counter signs the British economy is flagging.

Dealers said forex players will also be watching how the stock markets now fare following a rollercoaster ride, swinging between losses and gains in Europe after earlier sharp falls in Asia.

All the major stock markets in Europe had tumbled by between five and seven percent on Monday.

Dealers said the fierce equities sell-off had been bad news for the euro, which had hit to a record high 1.4967 dollars in November owing to favourable interest rate differentials.

"US and Japanese investors have been sending their money in the direction of the Eurozone for nearly two years looking for better returns," said John Noonan, an analyst at Thomson IFR.

"European equity markets have been popular with US investors in particular.

"If the market turmoil continues and US and Japanese investors accelerate their repatriation efforts, the euro can fall steeply against the US dollar and yen."

In European trading on Tuesday, the euro changed hands at 1.4616 dollars against 1.4455 late Monday, at 156.11 yen (153.16), 0.7461 pounds (0.7437) and 1.6052 Swiss francs (1.6018).

The dollar stood at 106.75 yen (105.97) and 1.0986 Swiss francs (1.082).

The pound was at 1.9578 dollars (1.9434).

On the London Bullion Market, the price of gold rose to 875 dollars an ounce from 871.25 dollars late Monday.

Fed cut fails to boost US stocks

US stocks were sharply lower on Tuesday and while the market was off its worst levels of the day, the Federal Reserve's rate cut failed to arrest the pessimism about the US economy and corporate earnings.

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About an hour before the opening, policymakers announced a rate cut of 75 basis points, slicing the Fed funds rate to 3.5 per cent. This was the biggest US rate cut since the October 1984 cut of 175bp. Initially, the move caused S&P stock futures to jump, but within 30 minutes they were lower than just before the cut was announced.

Alan Ruskin, chief international strategist at RBS Greenwich Capital, said: "Plainly the Fed realised that to try [and] stay ahead of the market they had to act immediately."

The US markets were closed on Monday for the Martin Luther King holiday. The benchmark indices reopened sharply lower, extending their big losses from last week, with the bearish tone accelerated by heavy selling across global markets.

Traders said an avalanche of sell orders had overwhelmed the stimulus of the Fed's rate cut.

At mid-afternoon, the S&P 500 was down 1.1 per cent at 1,311.02, having bounced back from a fall of 3.8 per cent in early trade. It has now fallen nearly 11 per cent this month.

Equity volatility, as measured by the Vix index, surged 38 per cent to 37.57 and eclipsed the peak set in August when credit and mortgage problems took their toll on the banking sector and the broad market. At mid-afternoon, the Vix was up 13.5 per cent at 30.84.

The rate cuts and the prospect of more to come sparked a rebound in financial shares, with the S&P sector up 2.1 per cent, although it remains lower by around 11 per cent since the start of the year.

The Fed holds its scheduled January meeting next week and the market expects at least a 25bp cut and possibly 50bp in the funds rate.

"More obviously the Fed feels that they need to get rates down rapidly, and the quicker they get rates to a point where it validates or more likely goes beyond what the market is pricing in, the better," Mr Ruskin said.

Apart from financials and consumer discretionary, the rest of the major sectors in the S&P were lower, led by a 3.3 per cent fall in utilities and a 2.6 per cent slide in technology stocks. The latter is down more than 20 per cent from its high of October, meeting the definition of a bear market.

The Nasdaq Composite was down 1.8 per cent at 2,297.55, and has fallen nearly 20 per cent from its high of last year. Shares in Ebay fell 3.5 per cent to $27.33 after a report said Meg Whitman, the auctioneer's chief executive, was preparing to retire.

In spite of the sharp falls, some analysts said the time for the strategic buying of selected stocks loomed.

"It makes sense for investors to consider increasing their exposure to equities into the sell-off, gingerly or aggressively, depending on their investment horizon," said Thomas McManus, chief investment strategist at Banc of America Securities.

Marc Pado, chief market strategist at Cantor Fitzgerald said: "The question is recession and people are using the term loosely." He added: "Bond yields have been low for some time, while rate cuts and fiscal stimulus from the government will likely propel a strong rebound in the economy during the second half of 2008."

Mr Pado said large cap and growth stocks with exposure to the global economy should be favoured by investors at this time.

Of the main US benchmarks, the blue-chip Dow Jones Industrial Average had suffered the least selling pressure, although it was down 0.9 per cent at 11,993.87.

This week, several blue chips announce their fourth-quarter results, led by Microsoft, AT&T, Caterpillar and Honeywell. Investors hope that positive results will help arrest the current selling pressure in stocks.

Among the financials in the news was Bank of America, after it said fourth-quarter net income fell to $268m. The bank reported trading losses of $5.44bn due in part to writedowns of collateralised debt obligations. After an early fall to $33.12, the stock was up 3.6 per cent at $37.25.

Wachovia reported a 98 per cent fall in earnings as it wrote down $1.7bn and set aside $1.5bn to cover bad loans. The stock also rebounded from negative territory and was up 4.6 per cent at $32.22.

Meanwhile, Ambac Financial Group reported a loss of $3.26bn after taking a $5.21bn writedown. Fitch Ratings cut the bond insurer to AA last week, a move that has sparked concerns that other financial institutions, which have used the insurer to cover positions, will mark down their portfolios.

The stock had risen 33.1 per cent to $8.25 after the chief executive said they were seeing strong interest from a number of parties about injecting capital into the insurer.

Shares in Dupont were up 0.4 per cent lower at $42.85, after the chemicals maker posted a quarerlly earings fall of 37 per cent from a year ago, when one-time items boosted results. Excluding those items, profit rose sharply buoyed by international sales.

UnitedHealth said quarterly earnings rose 3 per cent and it was 6.1 per cent lower at $51.10.

Johnson & Johnson, said quarterly profit rose nearly 10 per cent, boosted by higher revenues and the stock fell 1.1 per cent to $65.56.

Global markets take wild ride as Fed makes surprise cut

NEW YORK (AFP) - Global stock markets saw some relief from the mayhem of the past few days as the US Federal Reserve's surprise rate cut helped stem the massive losses seen around the world.

In a wildly volatile day for markets, Wall Street ended with moderate losses while European shares closed mainly higher a day after their worst session since 2001. Earlier, Asian markets plunged for a second day.

Traders said the Federal Reserve cut of three-quarters of a percentage point to 3.5 percent was welcomed as a dramatic assertion that policymakers were prepared to make tough calls to bolster growth.

The Dow Jones Industrial Average finished down 1.06 percent at 11,971.19 points, rebounding from a loss of over 400 points at the open. The blue-chip index has tumbled almost 10 percent in the year to date.

The tech-heavy Nasdaq slumped 2.04 percent to 2,292.27 and the broad-market Standard & Poor's 500 index shed 1.11 percent to 1,310.50 as the New York market saw its fifth straight losing session.

London's FTSE 100 index of leading shares closed 2.90 percent higher at 5,740.10 and the Paris CAC 40 index closed 2.07 percent higher at 4,842.54.

But the Frankfurt DAX ended the day 0.31 percent lower at 6,769.47 points.

Dealers said market worries persisted that the US economy was falling into a recession, amid a lingering housing market meltdown, that could hit the rest of the world.

The Fed rate cut gained support from investors, but some market-watchers believe further cuts are in store.

"This major move might seem like a panic response to the plunge in stock prices but it also makes sense," said Dick Green, a market analyst at Briefing.com.

"The markets are in a panic, and the Fed needed to respond in kind."

Markets appeared disappointed by the economic stimulus plan proposed Friday by US President George W. Bush, valued at between 140 and 150 billion dollars and viewed as confirmation that the world's biggest economy is headed for trouble.

"The notion that the rest of the world would be immune from a US slowdown was nonsense and the rest of the world woke up to the fact that the chance of recession is more than 50-50," said Nariman Behravesh, chief economist at Global Insight,

Behravesh said US and European markets "are not that overvalued but some of the emerging markets are, so I think it's not surprising that's where you see some of the biggest drops."

Dealers warned that markets could remain volatile for some time.

"In the end the Fed simply couldn't wait another week until it's next scheduled (rate) meeting," said Capital Economics analyst Paul Ashworth.

"It chose to act, cutting the fed funds rate by an almost unprecedented 75 basis points to 3.5 percent ... in an attempt to shore up confidence before US stock markets open."

In the face of the continuing market turmoil, world officials urged calm and played down recessionary fears.

White House spokeswoman Dana Perino told reporters the Bush administration was "not forecasting a recession" while German Chancellor Angela Merkel told NDR-Info radio: "There is no reason to believe there will be a recession in Europe or in Germany."

The Sao Paulo Bovespa stock market -- Latin America's biggest -- rallied 4.45 percent, clawing back some deep losses weathered a day earlier. Mexico's Bolsa index leapt 6.36 percent while Canada's S&P/TSX index shot up 4.2 percent.

Asian shares plunged earlier Tuesday, sending a clutch of markets down more than seven percent.

Tokyo, the region's biggest stock market, slid 5.65 percent to below the 13,000 points level for the first time since September 2005 while trading was briefly suspended in South Korea and India.

Paulson: Economy resilient but Fed move helpful

WASHINGTON (Reuters) - Treasury Secretary Henry Paulson said on Tuesday he was confident the U.S. and global economies were resilient but welcomed an emergency rate cut by the Federal Reserve as a helpful move.

The U.S. central bank cut benchmark U.S. interest rates by a steep three-quarters of a percentage point while Paulson while still answering questions after addressing a Chamber of Commerce breakfast meeting.

Paulson had earlier acknowledged the U.S. economy has slowed "materially" in recent weeks but, despite a meltdown in global stock prices, insisted that the global economy had "underlying resiliency" that would let it weather the storm.

The U.S. Treasury chief initially looked surprised when a Chamber of Commerce official said the Fed had just cut rates in a relatively rare move between meetings of its policy-setting Federal Open Market Committee, but praised the action.

"This is very constructive and I think it shows this country and the rest of the world that our central bank is nimble and can move quickly in response to market conditions," Paulson said.

The U.S. Treasury chief, who headed Wall Street giant Goldman Sachs before taking over Treasury in 2006, said the $145-billion short-term stimulus package that President George W. Bush was asking Congress to work on was needed to minimize the impact of a U.S. economic slowdown.

"We need to do something now, because short-term risks are clearly to the downside, and the potential benefits of quick action to support our economy have become clear," Paulson said.

But early signs were that Bush's call for bipartisan action -- and a relatively positive Congressional response to it -- were not calming financial markets but might actually be fanning fears that the economy was at greater risk of toppling into recession than officially acknowledged.

Stock markets around the world sank sharply on Monday, when U.S. markets were closed for the holiday in observance of slain civil rights leader Martin Luther King's birthday.

Paulson tried to reassure that there was reason to feel confident in the U.S. economy's long-term prospects, notwithstanding severe problems in the housing sector and other credit-market strains.

"The U.S. economy is resilient and diverse," he said. "It's been remarkably robust and it will be again."

He added: "The unemployment rate remains low and job creation continues, albeit at a modest pace. The structure of our economy is sound and our long term economic fundamentals are healthy."

Gold rallies after Fed cuts rates

Gold prices rallied on Tuesday after the US Federal Reserve cut interest rates in an emergency meeting in an effort to prop up the weakening US economy.

Spot gold in London surged to $874.65 a troy ounce as the US dollar weakened against the dollar after the Fed cut interests rates by 75 basis points to 3.5 per cent and warned it was ready to take further action.

Before the central bank action, gold prices had tumbled to a three-week low of $849.50 an ounce as traders took profits from the precious metal's recent rally to cover losses elsewhere. Gold hit in early January an all-time record of $914.0 an ounce.

Other commodities prices pared losses or move to positive territory after earlier heavy losses triggered by fears that the US economic slowdown could spread to emerging countries such as China and India, the main engine of fresh demand.

Sales of commodities, particularly of agricultural raw materials, to raise funds to offset losses in others markets also contributed to the price fall in early morning, traders said. Commodities prices registered strong gains last year and in early 2008.

Robert Laughlin of MF Global in London said that the immediate risk for commodities was "a liquidation of open positions by some market participants in order to finance positions on other markets."

After the Federal Reserve interest rate cut, crude oil prices pared losses with ICE March Brent down $1.14 to $86.37 a barrel. Previously, Brent fell to a low of $85.00 a barrel.

Nymex February West Texas Intermediate fell to $87.67 a barrel, a drop of $2.90 from Friday's close, but about $1.02 cents below Monday's last electronic quotes.

The Nymex exchange did not set a settlement price on Monday as the open-outcry trading floor was shut for a public holiday. But electronic trading late Monday had WTI at $88.69 a barrel, meaning the Tuesday loss was of about $1.02 a barrel.

WTI fell in earlier trading and before the central bank's action to a six-week low of $86.11 a barrel.

On the London Metal Exchange, copper pared losses to fell 0.2 per cent to $6,870 a tonne and aluminium moved 0.4 per cent higher to $2,420 a tonne.

Before the Fed interest cut, Peter Fertig, of Dresdner Kleinwor in Frankfurt, said: "Fears of a US recession dragging also the rest of the world into an economic slump had a negative impact on base metals."

Although analysts said that copper, the base metals' bellwether, is the most exposed to a US recession and any spill over to emerging markets, they also point that the red metal's inventories have fallen recently and demand in China remains healthy.

In addition, Zambia, the world's tenth largest copper producer, on Tuesday said it was rationing power supply to the mines as the country faces shortages, which could reduced copper supply in the next few weeks.

In spite of the Fed announcement, agricultural commodities fell sharply after strong gains last year and early 2008. In Chicago, CBOT March corn fell 19 cents to $4.79 ¼ a bushel and CBOT March wheat loss 23 ½ cents to $9.39 a bushel. CBOT March soyabean loss 39 cents to $12.25 a bushel.

US at tipping point toward recession: Lehman Brothers

SINGAPORE (AFP) - The US economy is "one shock away" from a recession, and a prolonged global equity meltdown may tip the scales, the US-based investment bank Lehman Brothers said Tuesday.

However, it is still "too early to pass judgment" on the situation, Paul Sheard, Lehman Brothers' global chief economist, told reporters. "It could be a self-fulfilling prophecy."

He spoke as global stock markets took another battering Tuesday, with losses of almost nine percent in Hong Kong on fears of a US recession, followed by sharp plunges in Europe.

European exchanges on Monday suffered their biggest one-day falls since September 11, 2001.

 

"If that were to continue for a couple of weeks, I think it could seriously start to change the complexion of the global outlook," said Sheard.

Lehman Brothers estimated a 40 percent probability of a US recession. Sheard conceded that the risks are growing that the world's biggest economy is in for a downturn, but it should be averted by aggressive moves from the Federal Reserve.

The Fed is widely expected to slash interest rates by as much as 50 basis points next week.

"But maybe they will react to this stock market meltdown and do something a little bit more aggressive to calm the nerves in the market," said Sheard.

Lehman Brothers is expecting the Fed to cut rates by 150 basis points by August to head off a US recession.

The Fed has already cut rates three times since September, slashing a full percentage point from its federal funds rate, which now stands at 4.25 percent.

A recession in the US may pull down Asian growth by as much as 4.5 percent, excluding Japan, said Lehman economist Robert Subbaraman, citing the region's heavy reliance on US exports.

Business economists gloomier about US economy: NABE

WASHINGTON (AFP) - Leading business economists are growing more pessimistic about the health of the US economy, but are more upbeat about their own company's prospects, according to a survey released Tuesday.

The National Association for Business Economists (NABE) panel predicted a sharply lower pace of gross domestic product (GDP) growth in the first half of the year, a quarterly survey showed.

Twenty-four percent of the panelists said they expected GDP to grow by an annualized rate above 2.0 percent in the first half, compared with 66 percent forecasting growth between zero and 2.0 percent.

One in 10 of the panelists said they expected GDP to decline in the first six months.

"This is a much gloomier outlook than respondents reported in previous surveys regarding either the first or second half of 2007," the NABE said in a statement.

In the October survey, 47 percent forecast growth in the 2007 second half of between 2.0 and 4.0 percent, and only 1.0 percent saw it declining.

"The January NABE Industry Survey shows a striking dichotomy," said Ken Simonson, chief economist at Associated General Contractors of America.

"Compared to the October survey, respondents are much gloomier about the outlook for the economy as a whole but are more upbeat about their own firms' pricing, capital spending, and hiring plans."

Despite a severe housing slump and tight credit that are leading some analysts to warn of recession, the survey found that 42 percent of firms plan to create more jobs in the first half, while only 17 percent will cut jobs.

The hiring outlook was more positive than in the previous four quarters, and "an encouraging sign for an economy at risk," the NABE said.

In the October survey, only 32 percent of respondents had planned to increase payrolls, down a notch from the 33 percent seen in the January 2007 poll.

Panelists raised their capital spending plans for 2008. Fifty percent said they expected to increase spending, up from 43 percent in the October survey.

Expectations of price increases in the first quarter jumped, with 47 percent planning to hike prices, compared with 33 percent in October.

While nearly all respondents expected the housing slowdown to continue -- and nearly half saw a further "substantial" downturn -- fewer than in October expect their business to be affected.

The survey of 98 NABE members was conducted between December 13 and January 9.

European stocks tumble

LONDON (AFP) - European stock markets closed very sharply lower Monday, with losses of more than five percent in many centres as investors sold off on concerns the US economy will fall into recession.

In London, the FTSE 100 index plunged 5.48 percent to 5,578.20 points.

In Paris, the CAC 40 index lost 6.83 percent to 4,744,45 points and in Frankfurt the DAX shed 7.16 percent to 6,790.19 points, with both markets seeing the biggest single day losses since the 9/11 terror attacks.

Dealers said the spark for the global rout was disappointment at US President George W. Bush's tax plan to revive the world's largest economy announced Friday.

After heavy losses in Asian trade, the European markets opened lower and then went lower again in the course of the afternoon as investors opted for safety and took their money out.

Dealers said Bush's remarks did not provide enough good leads to offset all the bad news coming through on the banks as a result of the collapse of the US housing market.

"There is a general nervousness in the markets at the moment over an economic slowdown," said Mark Outten, a trader at GFT Global Markets in London.

London investors are "battening down the hatches" as US recession fears grip the market, according to Richard Hunter, equities analyst at broker Hargreaves Lansdown.

"People aren't buying the US bail-out story and that feeling has been exacerbated by the weakness overnight in the Asian markets," he said.

"The other thing we have seen today is a lack of buying interest -- people are battening down the hatches while they see what happens in the US."

Outside the main markets of London, Paris and Frankfurt, there were also very heavy losses, with Spain down 7.54 percent -- the worst again since the 9/11 induced shock.

Oil prices fall on demand fears

LONDON (AFP) - World oil prices slid on worsening worries about a potential drop in energy demand owing to the weakness of the US economy, analysts said Monday.

New York's main contract, light sweet crude for delivery in February, shed 1.72 dollars to 88.85 dollars per barrel in electronic deals.

Brent North Sea crude for March delivery slumped by 1.51 dollars to 87.72 dollars in electronic trade.

"Oil prices have come off as market participants are concerned over potentially slower global growth and its effect on oil demand growth," said Sucden analyst Nimit Khamar.

"It looks like persistent economic concerns are now overshadowing any bullish tendencies or factors that drove crude prices to record highs earlier this month."

Prices remain at high levels but have shed more than 10 dollars since striking a record in New York of 100.09 dollars per barrel in early January.

"There were a number of developments which would have driven oil prices higher (Monday) had the market not been under pressure from a potential global recession," said Khamar.

The Sucden analyst pointed to recent comments by OPEC that the market is well supplied and unrest in major oil producer Nigeria as news that would normally send crude prices skywards.

A major oil pipeline belonging to Italian oil company Agip caught fire and a tanker truck exploded in separate incidents Monday in southern Nigeria, military and industry sources said.

The oil pipeline at Omoku in Rivers state had been ruptured before it caught fire early Monday, the sources said. It was not immediately clear if anyone was hurt in the incident.

The two incidents came barely one week after the most prominent militant group in the restive Niger Delta claimed responsibility for a series of attacks.

Instability and violence slashed oil output in Nigeria, the world's eighth-largest crude exporter, by a quarter in 2006 and 2007 to 2.1 million barrels per day, according to the latest estimates.

Traders are also looking ahead to the February 1 meeting of the Organisation of the Petroleum Exporting Countries in Vienna.

Last week US President George W. Bush voiced hope that OPEC would increase oil output at its upcoming meeting to combat high crude prices, after talks with King Abdullah of Saudi Arabia, the world's top oil producer.

OPEC ministers insist that geopolitical unrest and heavy oil buying by speculators are the reasons behind elevated prices.

Metals and oil hit by US recession fears

Energy and base metals prices fell on Monday, on worries that the fiscal stimulus package proposed by US president George W Bush will not be enough to stop the US economy falling into recession.

The strength of the US dollar against the euro also weighed on energy, base and precious metals. In London, spot gold fell to $873.80 a troy ounce, down from $881.90 an ounce on Friday in New York.

However, agricultural commodities in Europe, such as wheat, rose supported by robust demand and signs that production is not rising fast enough to refill nearly depleted global inventories.

Crude oil prices fell to one-month lows, but traders said that cold weather in the US and the north-west of Europe would support prices in the near term.

Nymex February West Texas Intermediate fell $1.51 to $89.06 a barrel while ICE February Brent dropped $1.25 to $87.97 a barrel. Heating oil and gasoline also fell.

The Organisation of the Petroleum Exporting Countries, the oil cartel, said that near record prices were not related to market fundamentals. Opec will consider whether to increase its production at a meeting in Vienna on February 1.

Mohammed al-Hamli, United Arab Emirates oil minister, on Monday said the cartel will "explore all options", but warned: "There is a disconnect between the fundamentals and the price."

Base metals fell across the board on concerns that a slowing US economy will translate in lower demand for metals such as copper and aluminium.

In the London Metal Exchange, copper prices fell 2.7 per cent to $6.970 a tonne and aluminium moved 1.0 per cent lower to $2,472 a tonne. The fall in copper prices come even as inventories at LME's warehouses drop by 2,325 tonnes.

Zinc fell 1.9 per cent to $2,310 a tonne while lead dropped 2.9 per cent to $2,510 a tonne. Nickel fell 2.5 per cent to $27,900 a tonne.

Agriculture markets remained unaware of the economic turmoil. Euronext.Liffe May wheat prices in Paris rose 0.6 per cent to EU252 a tonne.

The Indonesian government said on Monday it will scrap a 5 per cent import duty on wheat flour in a bid to ease local prices.

FTSE sheds 100 points at open

The FTSE 100 fell more than 100 points in the opening session of the week, pressured by a combination of renewed concern about the health of the US economy and fading bid talk in the mining sector.

The blue-chip fell to 2 per cent to 5,785.0, extending its run of consecutive negative sessions to five and intensifying its worst start to a year since its launch in 1983. The index has now lost nearly 10 per cent since the start of the year.

The losses in London follow heavy falls in Asia as investors gave President Bush's stimulus package an underwhelming response. In Japan, the benchmark Nikkei 225 slumped 3.4 per cent to a 27-month low of 13,395.28 by the end of morning trading. The index has lost a quarter of its value in the past six months.

Hong Kong's Hang Seng declined 2.4 per cent to 24,606.36, while Australian stocks extended their losing streak to 11straight sessions. South Korea's Kospi and the Singapore benchmark index were also lower.

Stock markets may struggle for direction later in the session because US markets are closed for a national holiday.

In London, every single stock on the senior index, bar two at the centre of confirmed bid activity, fell in morning trade.

Miners suffered the heaviest falls, as investors turned their backs on the bid rumour that helped the heavily-weighted sector provide some protection from the bearish conditions. As talk of an improved offer from BHP Billiton (NYSE:BHP) for Rio Tinto lost its lustre. Rio lost 6.2 per cent to £43.96 and BHP fell 6.7 per cent to £12.84.

There were also losses in the wider resources sector. Vedanta Resources lost 9 per cent to £15.75, Xstrata fell 5.5 per cent to £31.80 and Antofagasta was 4.7 per cent at 574½p.

Financial stocks were hit by worries that monoline insurers, which guarantee complex debt products from the risk of default could suffer as the wider repercussions of the credit crisis unwind.

London-listed insurers fell across the board. Old Mutual lost 5.1 per cent to 132.6p, Standard Life fell 4.5 per cent to 202p, Prudential lost 4.1 per cent to 573p and Aviva was 4 per cent weaker at 556p. But Friends Provident rose 1.8p or 1.2 per cent to 154.3p after reports that JC Flowers, the US hedge fund, was considering a bid for the struggling insurer.

Wolseley (NYSE:WOS) was the single biggest faller on the FTSE 100. The supplier of plumbing and heating goods directly exposed to the troubled US housing market said trading profit fell 25 per cent and market conditions looked set to worsen.

Lower down the market, Northern Rock rebounded 55 per cent to 100p after the government backed a proposal to convert the stricken bank's public loans of more than £25bn into bonds in a move that made a private sale of the company more likely.

China is not decoupling from U.S. economy: central banker

BEIJING (Reuters) - China's central bank on Sunday poured cold water on the idea that the country's economy can decouple from the United States.

China's exports will be badly hit if U.S. consumption weakens, Zhang Tao, deputy head of the international department of the People's Bank of China, told a financial forum.

Figures due this week are expected to show that China's gross domestic product grew more than 11 percent in the fourth quarter of 2007 from a year earlier, despite a deepening U.S. credit crunch.

But Zhang said he saw mounting risks to U.S. consumer demand. He noted that retail sales unexpectedly fell 0.4 percent in December, while property prices were falling and rising petrol prices were crimping disposable incomes.

"If U.S. consumption really comes down, that's bad news for us," Zhang said. "That will have a pretty severe impact on our exports."

Wang Jian, head of the China Society of Macroeconomics, agreed that China's growing trade with Europe was unlikely to insulate it from a drop in exports to the United States.

If U.S. demand weakened, Europe would export less to America and, in turn, would buy less from China, Wang said.

"Global demand is ultimately driven by the United States," he said.

More U.S. interest rate cuts or a further fall in the dollar in response to a weakening economy would have an impact on Chinese monetary policy, Zhang said without elaborating.

He said the subprime crisis would not divert China from the path of financial innovation.

"It will not change our general direction. However, it serves as a warning that we need to pay attention to risk controls and launch new businesses in a steady, orderly way," he said.

Dai Genyou, director of the central bank's credit bureau department, said higher Chinese interest rates would have little impact on the ability of companies to service their debts. Nor would they derail corporate investment plans, Dai said.

Consumer sentiment up, recession talk prevails

CHICAGO (Reuters) - U.S. consumers' mood unexpectedly brightened a bit in January but failed to silence the drumbeat of talk about a possible economic downturn.

A second report on Friday showed leading economic indicators for December continued to weaken, suggesting growth will remain sluggish for some time.

The reports came on a day when the White House announced plans for temporary tax cuts and other measures to fend off a possible recession. The U.S. Federal Reserve is also widely expected to slash interest rates by the end of the month.

The Reuters/University of Michigan consumer confidence reading for January was 80.5, well above the Wall Street consensus of 74.5. The reading rose from 75.5 in December, which was the weakest since October 2005, right after Hurricane Katrina.

"Given that economic conditions worsened significantly in early January, the current improvement in consumers' mood is hard to justify," said Anna Piretti, economist at BNP Paribas in New York.

Still, the promise of fiscal measures and interest rate cuts could counter some of the gloom created by recent stock market losses, countered Cary Leahey, economist at Decision Economics in New York.

The confidence report's assessment of current conditions was 98.1, up from 91.0 and the highest since August. The expectations measure was 69.1, up from 65.6.

Still, consumers took a negative view toward their current finances, shell-shocked as year-end statements on retirement savings accounts and brokerage accounts started to flood their mailboxes.

The University of Michigan said the data was consistent with personal spending growth of a modest 2 percent in 2008 -- hardly suggesting boom times.

"Despite this month's increase, households are still quite nervous about the state of the economy," said Steven Wood, economist at Insight Economics in Danville, California. "The index is just above recessionary levels."

In recent years consumer sentiment has not correlated well with retail spending, since many Americans apparently have been prepared to spend their way through good times and bad.

"The consumer has been the bulwark of the economy, contributing to growth for 63 consecutive quarters," said Chris Low, chief economist at FTN Financial in New York.

Now, the negative "wealth effect" of plummeting share prices, weak residential real estate, pain at the gasoline pump and shrinking access to credit has suggested that consumers are finally on the verge of buckling.

In a speech on Thursday, Cleveland Federal Reserve Bank President Sandra Pianalto tied a recent slowing in consumer spending to reduced household wealth.

Many economists expect consumer spending, which makes up about 70 percent of U.S. gross domestic product, to decline over the next few quarters.

"With the markets still in disarray consumers' confidence cannot stage a sustainable rebound," said Ian Shepherdson, chief U.S. economist with High Frequency Economics in Valhalla, New York. "Stock prices are a key leading indicator of sentiment, and the latest declines will hit the data next month."

The unexpected rise in sentiment briefly sent U.S. share prices higher on Friday. Stocks fell, however, after the White House proposed a stimulus package that raised doubts about how much of a boost it would give the economy.

President George W. Bush plans to call for a package equal to about 1 percent of U.S. gross domestic product. But specifics were absent from Friday's announcement.

In January to date the Dow Jones industrial average (.DJI) is down about 8.8 percent. The Nasdaq 100 index (.IXIC) has eroded more than 11.5 percent.

Even with a stimulus package on tap, "the underlying problems that are eating at the economy -- especially the rising default rates on consumer loans and mortgages -- will still be there," said FTN's Low.

The Conference Board's leading economic indicators report for December fell 0.2 percent, its third consecutive decline.

The New York-based private group's index measures 10 factors, from initial jobless claims to stock prices to building permits, to project future economic activity.

"The risk of outright recession is rising sharply; very slow growth is the unappealing alternative," said Shepherdson of High Frequency Economics.

Bush urges economic stimulus of at least 140 billion dlrs

WASHINGTON (AFP) - President George W. Bush called Friday for Congress to act quickly on a stimulus plan worth around 140 billion dollars to revive a US economy that some fear is on the brink of recession.

Bush's announcement came amid a growing consensus in political circles on the need to enact a plan to help stave off a downturn with a stimulus program based on tax rebates and breaks for businesses.

"Our economy has a solid foundation, but there are also areas of real concern," Bush said in a White House announcement aimed at providing the outline for a stimulus plan.

He called on Congress "to enact an economic growth package as soon as possible."

Bush said the package "must be big enough to make a difference in an economy as large and dynamic as ours, which means it should be about one percent of GDP."

Treasury Secretary Henry Paulson said that on that basis, the package should be "in the neighborhood" of 140 to 150 billion dollars.

"The package should be robust enough to make an impact this year, and should be temporary so that it doesn't impact our long-term fiscal position," Paulson said.

The effort comes amid growing calls on Capitol Hill for a stimulus to help an economy hurt by the worst housing slump in decades, which has led to massive losses in the banking sector and now appears to be hitting manufacturing.

Some lawmakers and officials are pressing for tax-rebate checks of at least 300 dollars per taxpayer, with some seeking as much as 800 dollars per person or 1,600 dollars per household, in addition to various business tax breaks.

With recession fears rising fast, Bush and Republican lawmakers appeared willing to make a concession to Democrats by accepting legislation that would not include an extension of Bush's tax cuts, which the White House has been seeking.

Bush said that he has consulted with lawmakers and added: "I believe there is enough broad consensus that we can come up with a package that can be approved with bipartisan support."

The news came amid the latest round of weak economic news and a downward spiral on Wall Street that prompted Federal Reserve chairman Ben Bernanke and others to talk up the need for swift action.

Speaking before Congress Thursday, Bernanke said a stimulus program of between 50 and 150 billion dollars would be "reasonable," but he said any program should be limited and temporary, and should be carried out rapidly.

"To be useful, a fiscal stimulus package should be implemented quickly and structured so that its effects on aggregate spending are felt as much as possible within the next 12 months or so," he told a House of Representatives budget panel.

Reacting to the White House announcement, Harold McGraw of the Business Roundtable, an association of corporate chief executives, praised the effort.

The group "favors a balanced package of consumer- and investment-oriented tax reductions of a temporary nature to put the economy on a firmer foundation for restoring growth," McGraw said.

Nariman Behravesh, chief economist at the research firm Global Insight, said such a plan could help avert or minimize a potential recession.

"It will have an effect on the economy, assuming the impact is in the second or third quarter," Behravesh said. "It could prevent a recession."

But Robert MacIntosh, chief economist for Eaton Vance Corp., said the plans being discussed would be less effective than permanent tax changes.

"I can't see handing checks to people as being effective," he said. "All it does is increase the deficit."

Sal Guatieri, economist at BMO Capital Markets, said however that the stimulus could help offset the impact of the slump in housing.

"The more stimulus the better, because the US is teetering on the brink of recession," he said.

Economist Ethan Harris at Lehman Brothers said that "if a recession is looming, fiscal action must be quick and tax rebates are probably the fastest way to get money into the economy."

"Perhaps even more important, the policy would provide a psychological boost to the economy," he added.

Bush wants $150 billion economic package

WASHINGTON (Reuters) - President George W. Bush on Friday called on Congress to give the U.S. economy a "shot in the arm" with an election-year package of temporary tax cuts and other measures worth up to $150 billion.

Bush said the United States, where share markets have slumped and unemployment is increasing, faced the risk of an economic downturn but that his advisers still expected continued growth, albeit at a slower pace.

He said he wanted Congress to move quickly on a stimulus package that would focus on tax rebates for families and incentives to encourage business investment. The White House said the package could create about 500,000 new jobs.

"This growth package must be built on broad-based tax relief that will directly affect economic growth and not the kind of spending projects that would have little immediate impact on our economy," Bush said at the White House.

"This growth package must be temporary and take effect right away so we can get help to our economy when it needs it most," he said.

Treasury Secretary Henry Paulson said the administration hoped for a package worth about $140 billion to $150 billion, which is a little more than 1 percent of the economy's size.

Financial markets are reeling amid bleak reports of declining retail sales and rising unemployment on top of soaring oil prices and a credit crunch brought on by a crisis in subprime mortgages.

Economists are talking of a possible recession taking hold before presidential and congressional elections in November and the debate over an economic stimulus has been taken up by candidates campaigning to succeed Bush in the White House.

Bush and the Democratic-led Congress are in rare agreement that a stimulus is needed. But they are still hammering out the details of a plan that is likely to include tax rebates of several hundred dollars each to help spur consumers as well as temporary tax breaks for businesses.

TAX REBATES

Under discussion are proposals to trim one of the income tax brackets and give the money back in a rebate. Lawmakers are also considering allowing businesses to immediately write off 50 percent of their new investments, a congressional source said.

Democrats are looking to provide states with some financial aid, extend unemployment benefits beyond the 26 weeks offered by most states and to get some more money for food stamps.

For now, lawmakers are putting aside the bitter partisanship that dominated last year's session and which resulted in near gridlock over spending, taxes, health care and the Iraq war.

"I am encouraged and share the president's view that we need prompt bipartisan action to strengthen our economy," said Senate Majority Leader Harry Reid. "I also agree that our focus must be on finding temporary measures that will do the job effectively."

Only a day earlier, the Nevada Democrat had expressed some disappointment with the results of a telephone conference between Bush and congressional leaders.

U.S. Sen. Charles Schumer, a New York Democrat, said after Bush's remarks on Friday that the president needed to accept some spending as part of the package.

"We want a balanced package of tax rebates for the middle class and spending stimulus that jump-starts the economy quickly," Schumer said at a news conference.

He said if Congress and Bush avoid a political fight over the package, it could be in place by March 1.

Most of the major White House contenders have unveiled proposals for the economy but they differ widely on specifics, highlighting the challenges in getting a bipartisan agreement.

Sen. Hillary Clinton, who has proposed a $110 billion plan that would target poor and middle-class people, said Bush's approach would shortchange struggling families.

"I don't think it does enough," she said in Las Vegas.

Meanwhile, Republican Sen. John McCain, campaigning in South Carolina, expressed wariness about some Democratic ideas for a stimulus, especially those focusing on spending.

"I want to see where that money is going to come from," said McCain, who laid out a proposal on Thursday for cuts in corporate tax rates and incentives for companies to invest in new equipment and research.

Banking economists put recession odds near 50 percent

WASHINGTON (Reuters) - A panel of banking economists has put the odds of a recession near 50 percent as the economy works through a housing slump this year.

The American Bankers Association's Economic Advisory Committee, a panel of nine banking economists, on Friday projected that the economy will slow to roughly 1.25 percent gross domestic product growth during the first half of this year, picking up to about 2.25 percent in the second half. But the risks of a recession are growing, the panel said in its outlook.

"Falling home prices, elevated energy prices, and strains in financial markets will continue to pose significant challenges to the economy," said Peter Hooper, chief economist at Deutsche Bank Securities in New York, who chairs the ABA panel.

The panel, which meets twice a year, met with Federal Reserve Chairman Ben Bernanke earlier this week to present its latest growth outlook for the year, Hooper said.

In its outlook, the ABA panel is expecting the Federal Reserve to cut its short-term interest rates by 50 basis points at its next meeting this month and by another 25 basis points in both March and April, lowering the federal funds target rate to 3.25 percent from 4.25 percent.

"Rate cuts are justified because of the continuing turmoil in the financial markets and a weakening economy," said Hooper, who added that an economic stimulus package from the president and Congress is badly needed.

He said that it would be something that must be in place by the end of this year to be effective in keeping the economy from going into recession.

The panel's forecast came out just ahead of President George W. Bush's announcement earlier on Friday calling for a stimulus package that would boost GDP by 1 percent. The president indicated that this plan must be put in place quickly.

Meanwhile, in the ABA outlook, economists noted that continued problems in the housing sector -- which are not likely to bottom out until the second half of this year -- along with funding challenges are causing banks to be much more cautious when it comes to lending.

Inflation is expected to remain on the higher end of the Federal Reserve's unofficial comfort range, but Hooper said boosting the economy is more of a concern for the Fed at this time, rather than curbing inflation.

Consumer sentiment up despite recession talk

CHICAGO (Reuters) - Consumers' mood brightened a bit in January, defying expectations driven by the constant drumbeat of talk about a possible recession, weak jobs market and falling stock prices.

At the same time, another report released on Friday showed leading economic indicators for December continued to weaken, suggesting growth will remain sluggish for some time to come.

 

The reports came at a time when the central bank is expected to slash interest rates and the White House is crafting a fiscal stimulus package to shore up an economy that many fear is headed into a recession.

"There's a ray of hope in the consumer sentiment figure which inched its way back up in early January," said Cary Leahey, economist at Decision Economics in New York.

The promise of fiscal measures and interest rate cuts from the Federal Reserve could counter some of the gloom created by recent stock market losses, said Leahey.

The Reuters/University of Michigan consumer confidence reading for January was 80.5, well above the Wall Street consensus of 74.5. The reading rose from 75.5 in December, which was the weakest level since October 2005, right after Hurricane Katrina.

Assessments of current conditions came in surprisingly rosy at 98.1, up from 91.0 and the highest since August. The expectations measure was 69.1, up from 65.6.

Still, consumers took a negative view toward their current finances, shell-shocked as year-end statements on retirement savings accounts and brokerage accounts started to flood their mailboxes.

The University of Michigan said that the data was consistent with personal spending growth of a modest 2 percent in 2008 -- hardly suggesting boom times ahead.

"Consumers are very cautious. I don't see the improved sentiment reading as heralding a big consumer spending turnaround," said Josh Stiles, strategist at IDEAglobal in New York.

In recent years consumer sentiment has not correlated well with retail spending, since many Americans apparently have been prepared to spend their way through good times and bad.

Still, the negative "wealth effect" of declining equities prices, weak residential real estate and constant pain at the gasoline pump has suggested that consumers are finally on the verge of buckling.

In a speech about the economy on Thursday, the president of the Cleveland Federal Reserve Bank, Sandra Pianalto, tied a recent slowing in consumer spending to reduced household wealth.

Some economists still expect consumer spending, which makes up about 70 percent of U.S. gross domestic product, to decline over the next few quarters.

"With the markets still in disarray consumers' confidence cannot stage a sustainable rebound," said Ian Shepherdson, chief U.S. economist with High Frequency Economics in New York. "Indeed, stock prices are a key leading indicator of sentiment, and the latest declines will hit the data next month."

The unexpected rise in sentiment briefly sent share prices higher on Friday. Stocks fell, however, after initial news of a White House stimulus package raised doubts about how much of a boost it would give the economy.

President George W. Bush plans to call for an economic stimulus package equal to about 1 percent of U.S. gross domestic product, according to a document obtained by Reuters.

In January to date, through Thursday's closes, the Dow Jones industrial average was down more than 8 percent. The Nasdaq 100 index was down more than 11 percent.

"One figure by itself won't change the game for investors. It's also worth noting that this (Michigan) reading is still lower than all the readings in the 2001 recession," said Tony Crescenzi, chief bond market strategist at Miller, Tabak & Co. in New York.

Meanwhile, the Conference Board's leading economic indicators report for December fell 0.2 percent, its third consecutive decline.

"Consumption and investment have weakened and even export growth, the remaining source of strength, has cooled," said Ken Goldstein, Conference Board economist.

The New York-based private group's index measures 10 factors, from initial jobless claims to stock prices to building permits, to project future economic activity.

"The signal from the survey is not yet unambiguous, but it is getting close. The risk of outright recession is rising sharply; very slow growth is the unappealing alternative," said Shepherdson of High Frequency Economics.

GE meets profit targets despite soft economy

NEW YORK (AFP) - American conglomerate General Electric delivered a fourth-quarter and full-year 2007 profit in line with most forecasts despite a US economy that appears to be faltering, the company said Friday.

The diversified company, sometimes seen as a microcosm of the US economy, said fourth-quarter profits rose four percent to 6.7 billion dollars, bringing 2007 earnings to 22.2 billion.

The profit, excluding special items, was in line with Wall Street estimates at 68 cents per share for the conglomerate that produces jet engines, locomotives, water treatment plants and medical equipment, has a major finance arm and controls the media-entertainment giant NBC Universal.

Revenues rose 18 percent to 48.6 billion dollars in the October-December quarter.

"We have built the company to outperform in this environment," GE chairman and chief executive Jeff Immelt said.

"We have strengthened the portfolio for growth, restructured to lower our cost, maintained our Triple A credit rating and stayed true to our risk management principles," he said.

"Our record performance in such a tough environment validates the strength of our strategy and the talent of our team."

GE's Infrastructure division, which makes jet engines, locomotives and oil and gas equipment, led the company with 26 percent profit growth in the fourth quarter.

NBC Universal, which owns Universal Studios and the NBC television properties, was the second best performing unit with 10 percent profit growth, after struggling in recent years.

"Film had its best year ever, with strong global growth," Immelt said. "Entertainment and information cable had record ratings and solid earnings growth. The network continues to improve its programming and cost position."

The GE industrial division, which produces appliances and lightbulbs, saw its profit rise seven percent. GE recently announced a restructuring of that unit that resulted in the loss of 1,400 jobs worldwide.

GE's finance arm produced a surprising seven percent gain in profits despite troubles in the banking and finance sector. GE Money provides banking and credit services to consumers, retailers, auto dealers and mortgage lenders in some 50 countries.

"Our financial services businesses performed well in an extremely volatile market," Immelt said.

Only GE's health care division, which makes medical imaging equipment, underperformed with a four percent decline in earnings.