Citigroup layoffs trump economic plan

WASHINGTON (AP) - Another round of massive layoffs at Citigroup and more bad financial news Monday led investors to shrug off the lengthy action plan from world leaders designed to address a sagging global economy.

Citigroup said it will cut about 53,000 more jobs in coming quarters as the banking giant struggles to deal with massive losses from deteriorating debt.

The global action plan was produced at a weekend meeting of leaders of the Group of 20, which included the world's wealthiest countries such as the U.S., Japan, Germany, Britain and France plus emerging powers such as China, Russia, Brazil and India.

Analysts say it will take more than one meeting to turn the tide for a global economy undergoing its worst upheavals in decades.

"To put it harshly, there is little point in trying to figure out ways to prevent a disease once a patient is sick," Credit Suisse Japan analyst Shinichi Ichikawa said in a report released Monday. "The just-concluded summit came up with no specific prescription to alleviate the effects of the most serious international financial crisis."

T.J. Bond, a Merrill Lynch economist in Hong Kong, said some investors were disappointed there was no explicit announcement of coordinated fiscal stimulus measures.

European analysts said the main winners were developing economies such as China and India, which have emerged from it wielding more influence in global decision-making than they have until now.

But investors are worried that governments will not respond with enough force and speed to combat what is shaping up to be a severe global downturn. In midday trading, the Dow Jones industrial average was down about 20 points, and major indexes in Britain, Germany and France were all down.

Earlier, Asian markets closed relatively flat despite confirmation Japan slipped into recession in the third quarter of the year for the first time since 2001. Japan's benchmark Nikkei 225 stock average closed slightly higher, and Hong Kong's Hang Seng index gave up early gains to dip 0.1 percent.

The Federal Reserve reported Monday that industrial output posted a better-than-expected rebound in October of 1.3 percent, but that increase came after the biggest one-month drop in production in more than 60 years. According to revised figures, factory output fell by 3.7 percent in September, the steepest plunge since a 5 percent drop in February 1946.

Both September and October were influenced by the hurricanes along the Gulf Coast and the strike at airplane manufacturer Boeing Co. Without those factors, the Fed estimated that production would have fallen by about 0.6 percent in both months.

Also Monday, the National Association for Business Economics released a somber new forecast projecting that the overall U.S. economy, which shrank at an annual rate of 0.3 percent in the July-September period, would contract at a rate of 2.6 percent in the current October-December quarter.

Just a month ago the group predicted the economy would post a 0.1 percent GDP growth rate in the fourth quarter.

"Business economists became decidedly more pessimistic on the economic outlook for the next several quarters as a result of the intensification of credit market stresses," said NABE President Chris Varvares, chief economist at Macroeconomic Advisers.

European stock markets traded modestly lower Monday following a mixed performance in Asia. Japan's Nikkei index rose slightly, despite a report showing the second-straight quarterly decline in GDP - signaling a recession. Elsewhere, major indexes in Hong Kong, Britain, Germany and France all fell.

Still, C. Fred Bergsten, director of the Peterson Institute for International Economics in Washington, said he would grade the weekend discussions in Washington a solid B, a far better mark he said than he has given many of the annual economic summits of the Group of Eight major industrial countries.

"They did a number of good things and came up with some solid principles to guide future discussions although I think it is going to take more than four months to reach major agreements," he said.

The G-20 nations agreed to hold another leaders' meeting before April 30, a little more than three months after President-elect Barack Obama takes office.

While the outgoing Bush administration stressed that Obama's team had been fully briefed on the G-20 discussions, analysts suggested that with all the problems facing the U.S. economy at present, Obama may not be eager to wade into the intricate details of international finance as one of his first orders of business.

But German Chancellor Angela Merkel disagreed, saying she was hopeful an Obama administration will participate fully in the G-20 efforts.

"I have not the slightest doubt that we will be able to proceed along the way we set out today," she told reporters at the conclusion of Saturday's meeting. "This is a reasonable approach that the new president will surely support."

Private analysts, however, noted that the G-20 joint statement papered over major disagreements between the countries. The Europeans, led by French President Nicolas Sarkozy, favor more government control over markets, while the U.S. position is that better, not more, regulation is needed.

Analysts said financial markets may be disappointed that the communique made only broad promises to "take whatever further actions are necessary" to stabilize the banking system and boost economic growth.

Some countries had hoped for numerical goals for increasing government spending by a certain percentage of a country's gross domestic product. The Bush administration resisted such a commitment, mindful that the U.S. rescue actions already taken could push the federal budget deficit above $1 trillion in the current budget year.

However, Obama and Democrats in Congress have talked about the need for a second stimulus package. With the U.S. economy showing signs of a sharp downturn, Congress likely will approve further assistance.

The NABE panel of 50 top private forecasters said they expected the economy would shrink again in the first three months of next year, and they predicted the unemployment rate, currently at a 14-year high of 6.5 percent, would rise to 7.5 percent by the end of 2009.

By wide margins, the panel believed that the recession and severe financial crisis that began in the U.S. would engulf much of the global economy.

The NABE panel predicted that Britain and much of the rest of Europe, Japan, Canada and Mexico would all suffer recessions in coming months while China and India were expected to see slower growth but avoid outright contractions.