* U.S. senators reach deal to bail out automakers
* Switzerland slashes interest rates
* IMF helps Iceland, Turkey
* Economists, Fed see recession well into 2009
* Oil falls below $50 on reduced demand
(For more stories on the financial crisis click ID:nCRISIS)
(Updates with reports of auto bailout deal)
By Jackie Frank
WASHINGTON, Nov 20 (Reuters) - U.S. lawmakers demanded
turnaround plans on Thursday from automakers as a condition of
a bailout aimed at halting an economic crisis that prompted a
record rate cut in Switzerland and rescue loans to Turkey and
Iceland.
The number of U.S. workers on jobless rolls surged to the
highest in quarter century and oil prices plummeted below $50 a
barrel for the first time since 2005 as investors anticipate a
long, global recession will slash demand.
Four U.S. senators announced bipartisan deal for
automakers, which briefly pushed U.S. markets higher and halted
a steep slide that had been touched off a day before on Wall
Street and had spread round the globe.
However, Democratic leaders warned the bill would not pass
unless it included a plan for the industry to return to
profitability and stocks soon sank towards six-year lows.
Democratic leaders said automakers can submit another plan
by Dec. 2 which could be considered the week of Dec. 8.
Shares of the two largest automakers were hostage to
bailout news, with General Motors swinging between losses of 39
percent and gains of 43 percent, and a similar range for rival
Ford Motor Co.
Automakers are battling tumbling sales, sparked by
evaporating credit for car buyers and crumbling consumer
confidence. GM and Toyota Motor Co both announced production
cuts in Thailand as they worked to cut a glut of unsold
vehicles.
The rapidly slowing world economy prompted Switzerland's
central bank to make a surprise one percentage-point interest
rate cut, its third in six weeks and largest since it adopted
its current system in 2000.
Analysts said the weak U.S. labor market almost guaranteed
a Federal Reserve Board rate cut at its next meeting on Dec.
15-16.
CNBC reported Saudi Prince Alwaleed bin Talal planned to
boost his stake in Citigroup back to 5 percent. Despite this
move by its largest investor, shares in the U.S. financial
giant fell as much as 25 percent to a new 14-year low due to
serious concern over its very survival.
"How many times is one going to take a beating before
realizing the market isn't going to bounce?" said Andrew
Kanaly, chairman of Kanaly Trust Company in Houston, Texas.
"The decline in the oil prices is a barometer of more economic
sliding globally."
In what would normally be a good sign for consumers but now
signals weaker global growth, U.S. crude futures plunged nearly
9 percent to $48.85 a barrel to a 3-1/2 year low on
expectations that a stalling economy would mean falling
demand.
All three major U.S. stock indices made broad swings, with
the Dow Jones industrial average marking its lowest since March
2003 and the Standard & Poor's 500 down more than 2.5 percent,
it lowest since October 2002.
World stocks tumbled to 5-1/2-year lows with volatile
emerging market equities down 4.71 percent. European shares
closed down 3.7 and Japanese stocks plunged nearly 7 percent.
JOB LOSSES, LONG DOWNTURN
A government report showed the number of workers filing new
claims for jobless benefits last week surged to the highest in
16 years. President George W. Bush backed an extension of
jobless benefits and U.S. Senate Democratic Leader Harry Reid
said it may be considered this week.
More than 4 million Americans were receiving jobless
benefits in the week ended Nov. 8, the highest since 1982.
Planned layoffs since September at non-financial companies
worldwide total at least 172,000, with an additional 89,500 in
financial sector losses. Leading economies will likely be in
recession for around a year, a Reuters poll of around 250
economists showed. The survey across the Group of Seven nations
showed economies faced recession for as much as five quarters.
"All developed economies will contract in 2009. It's the
worst we have had in a century. But to say it's going to look
like 1929 again for all these economies is a bit excessive,
it's too pessimistic," said Marco Annunziata, chief economist
at UniCredit in London.
The Federal Reserve said on Wednesday the U.S. economy
would contract through the first half of 2009.
"No end in sight," ING economists said in a note on
Thursday, a sentiment widely shared by investors.
Analysts said now the fear may be for a deadly economic
problem: deflation, marked by steadily falling prices and
economic stagnation.
"Once you get into a period of deflation, it's important to
get the economy turned around as soon as possible," said Lyle
Gramley, a former Fed governor who is now an analyst with the
Stanford Group in Washington.
The Philadelphia Federal Reserve said the prices paid
component of its monthly business survey fell to its lowest
level since the survey started in 1968. The report also showed
factory activity at an 18-year low in the region around
Philadelphia.
Japan's exports to Asia fell in October for the first time
since 2002, suggesting the fallout from the credit crisis has
spread to neighbors such as China.
IMF TO THE RESCUE?
With investors looking increasingly to governments and
other authorities to stop the rot, the IMF moved to prop up
both Iceland and Turkey. It approved a $2.1 billion loan for
Iceland, battered by a severe banking crisis, as part of a
$10.2 billion package.
The IMF said Iceland's economy would likely shrink 9.6
percent next year and unemployment quadruple to 5.7 percent.
Sources in Turkey told Reuters the IMF was ready to agree a
precautionary standby agreement of $20 billion to $40 billion.
Russia's Prime Minister Vladimir Putin said his country
would not allow the global financial crisis to capsize its
economy and announced a $20 billion stimulus package and help
for people who lose out in the downturn.
(Additional reporting by Richard Cowan, Tabassum Zakaria and
Reuters bureaux worldwide; Editing by Tom Hals)
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