Japan, emerging markets, banks all in firing line

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LONDON, Nov 10 (Reuters): Mounting economic gloom swept through Japan and several emerging nations Monday and European banks bore the scars of the worst financial crisis since the 1930s.
Rating agency Fitch cut Romania's credit rating to "junk" status in one of four emerging market downgrades and said the global financial crisis had put the ratings of South Korea, South Africa, Russia and Mexico in jeopardy.
Foreign investors have dumped east European assets on concern that countries such as Ukraine and Hungary, Romania, Bulgaria and the Baltic states may not be able to handle large foreign debt burdens.
Several nations, including Iceland, Hungary and Ukraine, have sought help from the International Monetary Fund (IMF). Fitch also cut the ratings of Bulgaria, Kazakhstan and Hungary.
In Asia, Japanese manufacturers suffered their biggest quarterly slump in machinery orders in a decade, official data showed, boding ill for capital investment as the economy teeters on the brink of recession.
Even fast-growing China has not proved immune.
Beijing approved a four-trillion-yuan ($586 billion) government spending package to boost domestic demand and help the world's fourth-largest economy ride out the crisis.
China's stimulus comes on top of more than four-trillion-dollar in government pledges around the world for bank bailouts, credit guarantees and fiscal spending to contain the damage from the worst financial turmoil in 80 years.
European Central Bank (ECB) chief Jean-Claude Trichet said many nations lacked the fiscal ammunition to follow China's cue.
"They already have deficits now, which are very substantial, and for them the room for maneuvering does not exist," he told Brazilian TV after a meeting in Sao Paulo of the Group of Twenty (G20) major economies.
Some Eurozone nations are set to breach the European Union's budget deficit cap of three-per cent of GDP this year and the US budget is creaking under the burden of the Iraq war and $700 billion earmarked for bank bailouts.
Troubled insurer American International Group (AIG) is poised to become the latest US financial institution to take government money.
Its board is nearing approval of a revised package to replace a previous $85 billion rescue, a person familiar with the matter said. The US government is now expected to buy $40 billion of AIG preferred shares and greatly ease lending terms.
President-elect Barack Obama is expected to top up the US bailout with hundreds of billions of dollars in a fiscal stimulus package, once he takes power in January.
Europe's biggest bank, HSBC Holdings, said its profit in the third quarter was up from a year ago as growth in Asia helped offset more than four-billion-dollar in bad debts on US home loans. But it said there would be tough times ahead.