US economy 'could recover by 2010'

Federal Reserve chairman says government must take swift action over crisis.

    Bernanke's comments come as US consumer
    confidence hit an all time low [AFP]

     

    The New York-based Conference Board said on Tuesday its consumer confidence index last month suffered its worst reading since it began in 1967, falling from 37.4 to 25 points.

     

    Recovery concerns

    Bernanke said radical actions by the US government since late last year when the financial crisis intensified have relieved some credit and financial strains in US markets.

    But he warned that "despite these favorable developments, significant stresses
    persist in many markets, notably most securitisation markets remain shut ... and some financial institutions remain under pressure.''

    Over the weekend it was reported that Citigroup and the Bank of America could receive more government funds to cover losses on risky investments.

    And on Monday US insurance giant AIG, which has already received about $150bn of US government aid, asked for more aid ahead of preparing for a record fourth-quarter loss of roughly $60 billion, Reuters news agency reported.

    Meanwhile the slump in consumer confidence was larger than expected, and compares with a reading of 76.4 taken at the same time last year.

    The board's expectations' index, which examines US consumers' outlook over the next six months, also slumped to 27.5 from 42.5 points, showing fears from consumers that continued job losses and market volatility were affecting the economy.

    Cash plea

    The administration of Barack Obama, the US president, is hoping its $787bn stimulus package of increased government spending and tax cuts will turn the US economy around, along with the revamped $700bn financial bailout package passed last year under the former administration of George Bush.

    Housing, credit and financial crises have plunged the US economy into its worst economic crisis since the Great Depression of the 1930s.

    US stocks remained slightly higher on Tuesday, a day after hitting 12-year lows, with the Dow Jones Industrial Index opening up 15 points at 7,130.

    Concerns over the global economy led to stock markets falling in Asia and Europe on Tuesday, with London's FTSE 100 index sliding by 0.36 per cent.

    Markets dive

    In Paris, the CAC 40 dropped one per cent as Frankfurt's DAX 30 dipped 0.37 per cent.

    Japan's benchmark Nikkei share average closed 1.5 per cent lower while Hong Kong's Hang Seng lost nearly four per cent and South Korea's Kospi more than three per cent.

    Other markets across the region also dived after US stocks fell more than three per cent - recording their lowest close since 1997.

    Singapore, Taiwan and India's markets dropped around one per cent each with Shanghai recording a fall of more than three per cent.

    SOURCE: Al Jazeera and agencies


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