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Financial chaos hits jobs - Views on News from Equitymaster
 
 
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  • Nov 22, 2008

    Financial chaos hits jobs

    Stories of paid leaves, pay cuts and job losses continue to pour in. The financial sectorhas been the worst hit. Citigroup has announced that it plans to cut 52,000 jobs in the coming year. That is twice the earlier layoff plan and 15% of its 352,000 strong workforce. Temasek, Singapore's state-owned investment company has announced a companywide pay cut. In fact, as per reports, financial job losses may double to 350,000 by 2009. Reductions on that scale would be equivalent to 20% of the global workforce at financial companies before the credit crisis began.

    The IT sector is facing the heat too. Indian IT major Infosys has given its employees the option to take a 1-year break and pursue philanthropic activities. They will continue to receive 50% of their salaries. There are also reports that nearly 500,000 jobs might be lost in the Indian textile sector in the next 5 months.

    In an interview with Fox Business, Warren Buffett has commented on the unemployment situation. He says, "There are going to be more people unemployed...but I'm not worried about how we come out in the end. I mean, I'm not worried about five years from now. Five months from now, can be very painful...it will be considerably higher...it will not turn around by mid-year next year."

    The mood across the global markets continues to be pretty sombre and indices oscillate wildly, alternating between despair and hope. Stock markets in the US edged lower with the Dow declining 5% during the week gone by.

    Sensex, the Indian benchmark, ended in the red on 4 days. Although it bounced back on Friday, the decline for the week stood at 5%. The realty sector continued to take a severe beating with the sector index falling by as much as 18%.

    The US auto industry has closely followed the US financial industry to the brink of failure. Hit by the biggest sales decline in nearly 25 years, GM has lost US$ 2.5 bn in the third quarter and if the current woes persist, the company might not be around by the time the year 2010 unfolds. Quite expectedly then, it is seeking a small slice of US$ 700 bn aid that the US government has passed on to the financial sector, to help it tide over the current crisis and enable it to come out with more fuel efficient and smaller cars.

    Jack Welch, the former Chairman and CEO of General Electric, says that the US auto industry should not be bailed out. He believes that a bailout would only put the companies on a 'life support system', whereas a complete overhaul is the need of the hour. Bankruptcy proceedings will enable renegotiation with all the stakeholders and facilitate a meaningful structural change.

    Crude oil declined by 9% during the week to US$ 49.9 a barrel. Gold prices moved in the opposite direction to end 9% higher at US$ 801 an ounce. Crude oil is now at 1/3rd of its all time peak of US$ 147 per barrel achieved in July 2008. While this brings much needed respite from inflationary pressures to countries like China and India, the producing countries are shell-shocked. They had planned huge public expenditure programs on the back of record prices for their bountiful crude oil reserves. The crash in the second half of the year is forcing them to take a second look at many of these programs.

    Source: Yahoo Finance Source: Yahoo Finance

    Source: Sebi Source: Equitymaster

    Source: Equitymaster Source: Equitymaster

    Movers and shakers during the week
    Company 14-Nov-08 21-Nov-08 Change 52-wk High/Low Change from 52-wk High
    Top gainers during the week (BSE-A Group)
    EIH Ltd. 81 93 14.6% 247 / 74 -62.4%
    IVRCL Infra. 115 132 14.5% 575 / 57 -77.1%
    Ambuja Cements 54 58 6.3% 161 / 43 -64.3%
    India Cements 82 87 6.0% 333 / 69 -73.9%
    GSK Pharma 1,070 1,126 5.2% 1,212 /800 -7.1%
    Top losers during the week (BSE-A Group)
    Unitech 46 32 -30.4% 547 / 27 -94.2%
    Housing Dev. Infra. 117 84 -28.4% 1,117 /79 -92.5%
    Educomp Solutions 2,429 1,785 -26.5% 5,650 / 1,515 -68.4%
    Thermax Ltd. 269 200 -25.6% 917 / 195 -78.2%
    JSW Steel 275 204 -25.6% 1,390 / 188 -85.3%
    Source: Equitymaster

    US president elect Barack Obama has chosen his Treasury secretary. Timothy Geithner, who heads the Federal Reserve Bank of New York, will steer the world's largest economy in what has turned out to be its largest economic crisis since 1929. The Dow gave the decision a thumbs-up with a 6.5% surge on Friday.

     

     

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