A fresh wave of profit warnings and job cuts soured investor sentiment on Thursday after an employment report suggested U.S. job losses in December could be the worst in almost 60 years.
Slumping demand for everything from air travel to clothing and personal computers has prompted a string of grim company reports in the past 24 hours on their outlooks, including from microchip maker Intel Corp, PC firm Lenovo, and retailer Marks & Spencer.
Asian stocks fell for the first time in nine sessions, even as governments and central banks pledged further action to try to limit the damage from a global crisis unlike any seen since the Great Depression of the 1930s.
"Everyone's been saying the market has factored in bad economic data and poor results, but now we're seeing that this wasn't really true," said Nagayuki Yamagishi, a strategist at Mitsubishi UFJ Securities in Tokyo.
"From here on we may see the real recession, and in that sense, the rise in global stock markets around the end and start of the year may actually have been based on errors of judgment."
Economic data remained unrelentingly bleak.
U.S. private employers shed close to 700,000 jobs in December, far more than economists had estimated; a report by ADP Employer Services said on Wednesday, suggesting a more comprehensive government report on Friday will be dismal as well.
"This is shockingly awful," said Ian Shepherdson, chief U.S. economist at High Frequency Economics in Valhalla, New York.
"If the recent relationship between the ADP numbers -- after their recent revisions -- and the official payroll data holds, then we should expect a number of about minus-700,000 on Friday, the biggest drop in 59 years."
Before the ADP report, the median of forecasts in a Reuter's poll on the government's report was for a loss of 500,000 jobs in December.
Workers are being laid off elsewhere too. German unemployment rose in December for the first time since February 2006, data on Wednesday showed.
Governments and central banks around the world have promised trillions of dollars in stimulus spending, slashed interest rates and bailed out companies to try and prevent more bankruptcies and contain spiraling job losses.
The Bank of England is expected to cut rates by at least 50 basis points to 1.5 percent on Thursday, the lowest in the central bank's history of more than 300 years.
The Bank of Japan has already cut rates to a rock-bottom 0.1 percent and Governor Masaaki Shirakawa said on Thursday the central bank could do more to stabilise financial markets.
Governments are expected to rack up steep budget deficits to fund spending plans.
The U.S. budget deficit will swell to a record $1.186 trillion in fiscal 2009, congressional forecasters said on Wednesday, as tax receipts shrink and the government bails out banks and automakers.
Such a deficit would be around 8-9 percent of gross domestic product based on annual economic output of close to $14 trillion.
Japan's deficit is expected to grow to about 15 trillion yen ($162 billion), or more than 2 percent of GDP, in the year to March 2012, the Nikkei business daily reported.
In South Korea, President Lee Myung-bak ordered officials to take preemptive measures to counter what he called a state of national economic emergency.
He had warned last month that Asia's fourth-biggest economy would shrink in the first half of this year for the first time in a decade.
In a sign that some of the extreme risk aversion of late 2008 had waned, governments from emerging economies including the Philippines, Turkey, Brazil and Columbia raised a total of $4.5 billion from international debt markets in the first trading week of the new year.
Just $2 billion was raised by emerging market sovereigns in the preceding four months as the collapse of Lehman Brothers sent global capital markets into a tailspin.
"The strong interest we received from domestic and global investors was key to the completion of the deal," Philippine Finance Secretary Margarito Teves said in a statement on Thursday after the sale of a $1.5 billion, 10-year bond.
STOCKS, OIL WEAK
Still, fresh concerns about profits and crumbling demand rattled equity and commodity markets.
Industrial metals prices dropped and oil slipped below $43 a barrel, extending a massive 12 percent fall the previous session as U.S. crude stocks rose on the back of weak demand.
China's Lenovo, the world's fourth biggest PC maker, which bought IBM's PC business in 2005, said on Thursday it was likely to post a significant loss in the December quarter and was cutting 2,500 jobs to reduce costs.
Macquarie Group, Australia's top investment bank, warned it faced extremely tough market conditions in the December quarter that would hit its profits.
On Wednesday, microchip giant Intel said again that slack demand for computers would hurt revenues, its second warning since November, sending its shares lower.
UK retailer Marks & Spencer announced it was cutting jobs and shutting stores as sales slid, while US Airways said it would post a loss for 2008.
