Europe set to slash rates as gloom deepens

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SINGAPORE/LONDON, Nov 6 (Reuters): Europe's top central banks were under pressure to slash borrowing costs by a record margin Thursday as part of global efforts to stimulate trade and commerce and ward off deep recession.
Markets looked also to US President-elect Barack Obama to name key members of an economic team that must tackle a crisis that originated in the US housing market before enveloping the financial system and toppling major banking institutions.
The European Central Bank (ECB) and the Bank of England (BoE) had been expected to cut interest rates by 50 basis points but markets are now pricing in bigger cuts after more evidence the world economy is slowing.
News of bigger-than-expected job losses in the United States, a sharp contraction in the world services sector, steep house price declines and a manufacturing retreat in Britain all underscored the global economic gloom.
Toyota Motor Corp, the world's biggest automaker, slashed its annual operating profit forecast by more than half and its shares tumbled over 10 per cent, making it the latest casualty in an industry hit hard by the slump. Goldman Sachs Group Inc was laying off 3,200 employees this week, according to sources familiar with the situation.
Markets buckled under the weight of the grim data, with stocks in Tokyo falling 6.5 per cent and elsewhere in Asia by more than 7 per cent.
The US Federal Reserve and central banks in Japan and China cut rates last week to shield their economies from the crisis that began when a US housing boom soured 15 months ago.
Australia kicked off this week's round with a hefty 75 basis point cut.
Obama's landslide win Tuesday along with the Democrats' tighter grip on Congress, raised hopes of a speedier injection of billions of dollars aimed at shoring up the struggling economy.
The ECB, staring at the first Eurozone-wide recession since its inception in 1999, is seen certain to cut its benchmark rate by half a point to a two-year low of 3.25 per cent. But interest rate traders are pricing in a 75 basis point cut.
A half-point reduction would match the October 8 emergency cut made in unison with the Fed and other major central banks. A larger reduction would be the ECB's biggest ever.
There is also mounting pressure on the BoE's monetary policy committee to act aggressively with financial markets factoring in a 75 basis point cut. Some economists are even calling for a full percentage point cut or more, which would be the MPC's most dramatic move since it was set up 11 years ago.
Underscoring the urgent need for decisive action, a survey showed Wednesday global services activity last month hit its lowest since 2001.
British manufacturing suffered its longest decline since 1980 and in the United States a private jobs report pointed to a bleak non-farm payrolls report Friday.
Pacific Rim officials, who gathered in Peru ahead of that meeting, called for large emerging economies such as China and Brazil to have a greater say in running the world's financial system.
Amid the economic gloom there were some pockets of resilience. Australia reported a surprising rise in jobs in October, the month when world stock markets suffered their worst ever battering.