Finance and Economic

JPMorgan Chase & Co., the largest U.S. bank by assets, will cut 9,200 Washington Mutual Inc. jobs nationwide as it acquires the Seattle-based lender, a spokesman said.

The bank will eliminate 4,000 jobs and put 5,200 employees on a transition team. Those employees will help integrate the banks, and some will remain in the positions until the end of next year, JPMorgan spokesman Thomas Kelly said in an e-mail.

JPMorgan paid $1.9 billion in September for most of Washington Mutual, including the branches and deposits, after the thrift was taken over by the Federal Deposit Insurance Corp.

New York-based JPMorgan expects to keep most of the WaMu branch employees and will shutter less than 10 percent of the combined company’s retail outlets free credit reports.

WaMu’s former Seattle headquarters will account for 3,400 of the job cuts, the Seattle Times reported. The bank is also cutting 1,600 jobs in California, mostly in back-office operations.

Washington Mutual had more than 43,000 employees at the end of June.

JPMorgan dropped $5.54, or 18 percent, to $26.12 in New York trading. The shares have fallen 40 percent this year.

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North American stock markets fell sharply again today as investor confidence was eroded by bad economic data and pessimism over the prospects of a U.S. bailout for the Big Three automakers.

Wall Street stocks were slammed the hardest, hitting levels not seen since 2003. In Toronto, all of the sectors were lower, led by diversified metals and financials stocks.

The main S&P/TSX composite index fell by 345.17 points to 8,490.56, a drop of nearly four per cent.

On Wall Street, the Dow Jones industrial average shifted down 427.47 points to 7,997.28. The Nasdaq composite index lost 6.5 per cent, or 96.85 points to 1,386.42 and the S&P 500 tumbled 52.54 to 806.58, the lowest close for that index since March 2003.

TSX financials stocks took a beating, down 4.9 per cent, after the Bank of Nova Scotia (TSX: BNS) warned Tuesday of a bigger-than-expected $595-million hit to its quarterly earnings caused by financial-market upheaval.

The other banks are expected to suffer similarly to Scotiabank when they issue their fourth-quarter results, starting next week. Scotia’s shares were down $1.93 to $35.24.

The Canadian dollar was at 79.83 cents US, down 1.48 cents, and the TSX Venture Exchange lost 20.16 points to 730.09.

Top Senate Democrats said today that Congress is unlikely to reach a quick bailout for the Big Three Detroit automakers, who are pleading for $25 billion in cash to stave off bankruptcy.

Congressional Democrats have proposed using part of the $700 billion financial bailout package to pump into the ailing auto industry, but the White House opposes such an approach.

Investors are concerned at the repercussions should any of the three automakers collapse, an event that could ripple through an already battered North American economy.

"There’s a general malaise among investors right now," said James Cox, managing partner of Harris Financial Group. "Everybody is in wait-and-see mode of what is going to happen with these big three automakers."

Bank of Canada governor Mark Carney strongly indicated today that the central bank will cut interest rates further next month in an effort to stimulate the economy. Carney told a luncheon in London that the economy is slowing more than previously thought, and inflation is less of a concern cash advance in one hour.

The TSX diversified metals sector slid 11.5 per cent, and Teck Cominco Ltd. (TSX: TCK.B) slid 15 per cent to $5.22.

Energy stocks were down 3.8 per cent as crude oil lost 77 cents to close at US$53.62 a barrel on the New York Mercantile Exchange.

The gold sector trekked 2.8 per cent lower as gold futures ended ahead for the first session this week on U.S. dollar weakness.

The December bullion contract closed up $3.30 to US$736 an ounce.

In economic news, Statistics Canada’s composite leading index – an indicator of future activity – fell 0.4 per cent in October. It was the biggest decline since the early-1990s recession, after a 0.3 per cent drop in September.

New American data showed deepening weakness. Construction of new homes plunged 4.5 per cent last month to the lowest level on government records. The Commerce Department said residential construction fell to an annualized rate of 791,000 units.

U.S. consumer prices, meanwhile, fell by the largest amount in records dating back to 1947, down one per cent last month as gasoline prices receded sharply. Core prices, excluding volatile food and energy costs, were down 0.1 per cent – the first decline in more than a quarter-century.

In earnings news, supermarket operator Metro Inc. (TSX: MRU.A) rang up $72.3 million in summer-quarter profit, up 25.5 per cent from year-ago earnings that were reduced by the integration of A&P stores. Sales were up 1.8 per cent from a year ago. Metro shares were at $33.

The Resolve Business Outsourcing Income Fund (TSX: RBO.UN) is suspending distributions to investors. The trusts units plunged 55 per cent, or $1.94, to $1.56.

Norsemont Mining Inc. (TSX: NOM) says its board has set up a special committee to deal with "recent unsolicited expressions of interest to acquire the company" and shares were ahead 15 per cent, or 25 cents, to $1.95.

Forestry company Tembec Inc. (TSX: TMB) fell to a quarterly loss of $4 million from year-earlier profit of $22 million, as sales declined to $629 million from $675 million. Shares dropped a penny to $1.56.

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BONN–Deutsche Post AG is poised to announce thousands of job cuts at its DHL Express operations in the United States, possibly as early as today, a German weekly reported yesterday.

The Bonn-based express mail and logistics company was poised to announce the cutbacks at its DHL operations in the United States would affect between 12,000 and 13,000 jobs, the report in the Frankfurter Allgemeine Sonntagszeitung said.

The cuts are part of a wider plan to curtail operations in the U.S., including ground deliveries, and would likely affect drivers, shipping clerks and warehouse workers. The express unit employs some 18,000 workers.

The expected move will not signal Deutsche Post’s exit from the U Faxless pay advances.S., where it faces strident competition from UPS Inc. and FedEx Corp.

The report said the company’s U.S. logistics unit, which employs some 25,000 people, would not be affected and some staff at DHL would remain.

Deutsche Post itself did not comment yesterday.

Deutsche Post said earlier this year that competition, rising fuel prices and other factors have put its U.S. DHL operations on track to lose 1.3 billion euros ($1.6 billion U.S.) by the end of the year.

Associated Press

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General Motors Corp and Ford Motor Co posted more than $27 billion of net losses in the first half of 2008 — and that was before a deepening economic slowdown pushed industry sales beyond 15-year lows.

What either automaker will report for an encore in the third quarter could be overwhelmed by the potential merger of Chrysler LLC into GM or various other scenarios of some or all of the Auburn Hills, Michigan automaker being sold.

Both are expected to post dismal third-quarter results on Friday, capping off a disastrous week that started with reports that U.S. auto sales plunged to the lowest annualized rate in a quarter century in the first month of the fourth quarter.

Analysts on average expect GM and Ford to post losses of roughly $2 billion each for the third quarter excluding one time items, according to Reuters Estimates.

Cash flow remains key to investors, who saw GM stock fall to a 58-year low and Ford stock to a more than quarter century low in October, as does U.S. consumer confidence, which fell to a record low in October.

A deal to unite GM and Chrysler hit a wall after the Bush administration last week ruled out funding it, leaving any merger between the companies contingent on federal aid under the next administration, people familiar with the talks said.

October sales fell from bad to worse amid the financial sector failures that forced a $700 billion bailout plan in the United States and numerous props for banks in other countries.

“Auto companies just don’t make money in a recession,” Morgan Stanley analyst Adam Jonas said in an October note to clients referencing the slowdown in European automaker results that is just as relevant for U direct payday loan cash advance.S. companies.

While the talks between GM and Chrysler owner Cerberus Capital Management LP have taken most of the spotlight, Ford also has had discussions with policymakers about the challenges facing the industry and the automaker.

“We just want to make sure we continue that ongoing dialogue and make sure that whatever happens there is a degree of parity,” Mark Fields, Ford’s president of the Americas, told reporters last week.

Ford earlier in 2008 said it would accelerate plans to bring European-designed cars to North America and convert some pickup truck plants to car production. It is expected to provide a business plan update on Friday.

WHERE THE RUBBER HITS THE ROAD

GM’s U.S. sales were down more than 20 percent in 2008 through October, while Ford sales were down 18 percent in its core brands. Both lagged the 15 percent industry decline.

In recent years, special charges have been hard to predict for Ford and GM due to massive North American restructurings that have failed to keep pace with eroding markets. They combined for $17.1 billion of charges in the second quarter.

Charges could include costs for white collar job cuts and buyouts of unionized hourly workers. Ford cut white collar expenses in the summer and told the UAW in September that it had about 4,000 more hourly workers than it needed. 

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The global downturn is forcing South Korea, Thailand and Indonesia to put on ice long-planned privatizations of banks which are either now needed as policy tools or look unattractively short of capital.

As crumbling financial markets hammer asset values of banks across Asia and with no sign of any quick recovery, governments are unlikely to dare loosen control over banks already in their charge and may well tighten their grip.

“In the current situation, governments have to take a leading role in stabilizing financial markets and that could be done through state-run banks,” said Park Jeong-hyun, a Hanwha Securities analyst in Seoul.

“Bank privatization should come once financial markets stabilize and we gain confidence in them.”

The delay also means retreating from attempts to reform and consolidate the region’s battered banking sector, which Asian governments spent hundreds of billions of dollars bailing out in the wake of the 1997-98 Asian financial crisis.

It also removes potential extra revenue just as governments want to boost fiscal spending to cushion the impact of a looming global recession.

Governments around the world have so far agreed to inject more than $4 trillion into banks, nationalizing some and guaranteeing deposits for many.

“In the short term, we should expect to see more government intervention in banks in order to support them through the credit crisis, not less,” said David Marshall, Managing Director of Fitch Ratings.

“In some other countries, banks are being wholly or partly nationalized as part of government support mechanisms cash advances pay day loan. I would not expect to see this happen on a significant scale in Asia but banks may well need liquidity support from central banks.”

DELAYS

The Bank of Thailand’s rescue arm, Financial Institutions Development Fund (FIDF), said last month market conditions meant it was not ready to sell stakes in Krung Thai Bank KTB.BK, Thailand’s No. 2 bank, or Siam City Bank SCIB.BK.

When South Korea’s chief financial regulator, Jun Kwang-woo, said the government would be flexible about the timing of privatizing Korea Development Bank (KDB), it was taken as a signal of a delay in what has been central to ambitious financial reforms President Lee Myung-bak wanted to wrap up by 2012.

South Korea has also put off cutting its 73 percent stake in Woori Finance Holdings (053000.KS: Quote, Profile, Research, Stock Buzz), the country’s No. 2 financial services group, and the Industrial Bank of Korea (IBK) (024110.KS: Quote, Profile, Research, Stock Buzz), citing market conditions.

Full privatization of the three banks is valued at more than 37 trillion won ($29 billion), according to a KDB estimate and market prices.

Instead, the government is now set to inject 1 trillion won in KDB and 500 billion won into IBK to give them room to expand lending to cash-strapped small companies. 

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Pakistan must secure a loan from the International Monetary Fund within a week, the German foreign minister said Tuesday, as the country scrambles for aid to avert a run on its currency and a default on its international debt.

Without help, the fight against terrorism in the nuclear-armed nation could be complicated by out-of-control price increases, fewer jobs and rising public anger in the country of 160 million people.

German Foreign Minister Frank-Walter Steinmeier said Tuesday that Pakistan’s problems were so urgent it had no choice but to seek an IMF loan.

"I can only hope that the decision is taken quickly, because a loan in six months or six weeks will not help, but only if it is approved within the next six days," Steinmeier told reporters after talks here with Pakistani officials. "Then one can perhaps avoid the most difficult situation in Pakistan."

While Pakistan has already approached the IMF to help solve its balance of payments crisis, it has held out hope that it can raise about $5 billion from other lenders — avoiding an IMF austerity program.

Steinmeier said Germany, Europe’s biggest economy, and other countries were discussing a separate package of assistance for Pakistan to boost faltering economic growth.

"That is the only way to stabilize the situation," Steinmeier said. Pakistani Foreign Minister Shah Mehmood Qureshi said Steinmeier had been "very supportive" of Pakistan in talks with its foreign backers one hour cash loan. He did not mention the IMF.

High oil prices and dwindling overseas investment have left Pakistan with a yawning balance of payments deficit. The gap is draining its foreign currency reserves and pushing it toward a default on its international debt.

Pakistani officials had hoped to persuade allies such as the United States and Saudi Arabia, as well as institutions including the World Bank, to provide soft loans or accelerate pledged development aid.

But with many governments preoccupied with the global banking crisis, Pakistan has received no firm public commitments of assistance. An IMF program would be politically unpopular in Pakistan because it likely will come with tough conditions.

The government insists it already has taken action to slash unsustainable subsidies on food and fuel — measures that hurt in a country where about three-quarters of the population live on no more than $2 a day.

There is speculation that an IMF loan might come with demands to slash the government’s own budget, including defense spending. In a sign of the times, the army on Tuesday halted work on a new general headquarters in the capital, saying it "shares the nation’s quest for economic stability through a spirit of sacrifice."  

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Asian and European leaders closed ranks on Saturday to try to bolster the confidence of shell-shocked investors fearful that the year-long global credit crunch is mutating into a worldwide recession.

Poor economic data around the world and another international barrage of corporate profit warnings and job cuts triggered a brutal sell-off in stocks from Tokyo to New York.

“The danger of a collapse (on financial markets) is far from over. Any all-clear would be wrong,” German Finance Minister Peer Steinbrueck said in an interview released on Saturday.

“We are still in a dangerous situation. I am not going to mislead anyone and say: we have got everything under control,” he told Bild am Sonntag newspaper.

The worries of political leaders were mirrored in the markets how to get a free credit report.

Seventy-nine years to the day after the 1929 crash that ushered in the Great Depression, currencies experienced extreme volatility, while oil and other commodities tumbled on fears of plummeting demand that would accompany a slowdown.

Many analysts declared that Europe was in recession after private-sector activity in the euro zone’s economy contracted at the fastest pace in at least a decade and Britain’s economy shrank 0.5 percent in the third quarter, much more than expected.

“The euro area has entered a deep recessionary spiral,” said Aurelio Maccario, chief euro zone economist at Italian bank UniCredit. 

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General Motors Corp is pushing ahead with talks to acquire Chrysler LLC in a deal that the automaker sees as a way to boost its cash position at a time when it has been shut out of debt markets and its own revenues are tumbling, sources said.

The negotiations involving Cerberus Capital Management, Chrysler’s private equity owner, have intensified in recent days and are moving closer toward a conclusion, according to people briefed on the talks who asked not to be identified.

The prospect of merging Chrysler and GM has been viewed as a deal of desperation by most analysts since both automakers are losing money and are saddled with a cash-draining surplus of American dealers, workers and plants.

But GM executives believes the automaker could clinch a deal that would give it a share of Chrysler’s remaining cash while allowing it to cut costs quickly, the sources said no qualifying payday advance.

Although it does not report financial information, Cerberus has said Chrysler ended June with $11.7 billion.

Chrysler has 14 assembly plants and the expectation is that many of those would be in danger of being shut if it merges.

Once the deal closes, GM is only interested in keeping Chrysler plants where the No. 3 U.S. automaker has made significant investments in retooling, the sources said.

That could include Chrysler’s truck plant in Saltillo, Mexico, the Jefferson North Jeep plant in Detroit and its Belvidere, Illinois car assembly plant, one source briefed on the talks said. The sources were not authorized to discuss the talks since the companies are saying nothing on the record. 

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The Canadian dollar suffered its biggest one-day drop in almost 38 years and oil slid below $78 (U.S.) a barrel yesterday as investors continued panic selling across the board on global markets.

"The dollar is in free fall along with commodity prices," said Sal Guatieri, senior economist at BMO Capital Markets.

"It’s ongoing fear that we’re heading for a global recession, and probably a deep one," he said.

When all was said and done, the S&P/TSX composite index shaved another stunning 535.02 points to close at 9065.16 for a loss of 16 per cent this week.

The Dow Jones industrial average, down nearly 700 points at one point in trading, lost 128 points to close at 8,451.19, rounding out its worst week ever.

"This is unprecedented. We don’t know when it’s going to end," said Guatieri.

"This could be a repeat of the early 1980s. It was pretty bleak for years."

Kate Warne, Canadian market specialist at Edward Jones in St. Louis, said emotions are driving behaviour in the market.

"Typically, we don’t see this kind of fear-based selling continue day after day like we’ve seen so far, but no one knows what the catalyst will be to turn sentiment around," Warne said.

"It’s very difficult to see what will change that, but we know historically it changes quite quickly and that what you tend to see is the emotions swing in the other direction just as dramatically as it’s been on the fear side so far."

As brutal as the markets looked though, most Canadians had their eyes on the ailing loonie, which at one point plunged almost five cents – its biggest drop ever – before settling halfway back.

It closed down 2.59 cents (U.S.) to 84.69 cents. The loonie has lost 7.77 cents, or 8.4 per cent, this past week alone as the U.S. dollar strengthens and as investors continue to bail out of the market on continued fears of economic instability.

"The prospects for the global economy seem to be dwindling fast and, as a result, the prospects for commodity markets are also ebbing and that’s weighing very heavily on the dollar," said Michael Gregory, senior economist at BMO Capital Markets.

"Even China, the engine of global growth, cut interest rates this week hoping to stave off lower growth there. The prospects are looking quite dim for commodities."

And the collapse in oil markets accelerated yesterday as investors grew more pessimistic about a mushrooming global crisis.

Light, sweet crude for November delivery fell $8.63 to settle at $77.99 a barrel on the New York Mercantile Exchange.

Even gold, normally the safe haven in times of turmoil, didn’t escape unscathed, falling $27.70 to close at $855.40 in New York as investors sold the metal to cover losses in the equity markets.

With files from The Canadian Press

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Drugstore chain Walgreen Co. has withdrawn its $2.8 billion bid to acquire Longs Drug Stores, apparently helping to ease the path for Longs’ $2.7 billion acquisition by CVS Caremark Corp.

Longs had already accepted CVS Caremark Corp.’s lower bid of $71.50 per share, a deal already approved by antitrust regulators.

Walgreen Chief Executive Jeffrey Rein sent a letter to Longs’ board of directors informing them of Walgreen’s decision to withdraw its bid. He cited what he called Longs’ board’s refusal to "engage in a constructive dialogue" as well as the broad financial meltdown as reasons for the withdrawal.

Some had questioned whether Walgreen would face antitrust issues because of overlap between its West Coast stores and Longs’. Longs said on Sept. 26 that the Federal Trade Commission was investigating whether a Walgreen acquisition would reduce competition among retail pharmacies in parts of California, Nevada and Hawaii, where Longs has most of its stores.

Some Longs shareholders have criticized the CVS deal, saying it may undervalue Longs’ real estate.

Major shareholder Advisory Research has not decided if it will tender its shares in favor of the CVS bid but has questioned the deal direct faxless payday loans. Another major shareholder, Pershing Square Capital Research, has said it is against the CVS deal. The two firms combined own about 18% of Longs shares, and the deal requires approval from shareholders owning two-thirds of Longs stock.

Longs, based in Walnut Creek, Calif., has more than 500 stores, mostly in California, but also in Hawaii, Nevada and Arizona. The company also owns Rx America, a prescription benefits management program with more than 8 million members.

The deal would give CVS, which already has a large presence in Southern California, a deeper foothold into the northern part of that state.

Messages left with representatives of Longs and CVS were not immediately returned.

Shares of Deerfield, Ill.-based Walgreen (WAG, Fortune 500) rose 7 cents to $26.25 in after-hours trading following the announcement, while Longs (LDG, Fortune 500) shares fell $2.48 to $69.20. Shares of Woonsocket, R.I.-based CVS (CVS, Fortune 500) were unchanged after-hours after rising 71 cents to $29.84 in the regular session. 

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