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South Korea’s consumer confidence fell to the lowest level since the Asian financial crisis a decade ago on concern faltering economic growth will lead to further job cuts and falling incomes.

The sentiment index sank to 81 in December from 84 in November, the Bank of Korea said in Seoul today. That’s the lowest reading since the fourth quarter of 1998. A score below 100 indicates pessimists outnumber optimists.

President Lee Myung Bak said two days ago the export- dependent economy may shrink in the first half of next year, which would mark the nation’s first recession since 1998. South Korea’s Hynix Semiconductor Inc. and Hyundai Motor Co. have joined global counterparts in cutting production as the global economic slowdown deepens.

“The economy is heading for worse times as both consumer spending and exports weaken,” said Go You Sun, an economist at Daewoo Securities Co. in Seoul. “It’s difficult to see consumer sentiment picking up for a while.”

The Kospi stock index fell 2.8 percent to 1,086.57 at 10:46 a.m. in Seoul, extending this year’s slump to 43 percent. The won climbed 1.1 percent to 1,285.50 against the dollar, and has dropped 28 percent this year, making it Asia’s worst performer.

An index measuring consumers’ views of the economic outlook declined to 56 in December from 58 in November. The nation’s jobless rate rose to a 16-month high of 3.3 percent in November.

Job Security

“Consumer sentiment is continuing to deteriorate due to concern about job security and a drop in incomes,” the central bank said in today’s report no teletrak payday loan.

Hynix Semiconductor, the world’s second-biggest maker of memory chips, said this month it will eliminate 30 percent of its executives and cut labor costs by more than 15 percent.

Hyundai Motor, South Korea’s largest automaker, and affiliate Kia Motors Corp. said on Dec. 22 they will freeze wages for administrative workers and shorten factory operations. Hyundai’s sales in the U.S., its biggest overseas market, tumbled 40 percent in November.

The Organization for Economic Cooperation and Development this month said South Korea should use fiscal stimulus and interest-rate reductions to buttress the economy.

Annual growth will slow to 2.7 percent in 2009, which would be the weakest pace since the economy was last in a recession in 1998, the OECD forecasts.

South Korea has pumped funds into the financial system, cut taxes and boosted public spending to limit fallout from the global credit crisis. The Bank of Korea has slashed its key rate by 2.25 percentage points since October, the most aggressive easing since it first set a benchmark in 1999. The bank cut the rate to a record low of 3 percent on Dec. 11.

The consumer confidence index is based on a survey of 2,200 households in 56 major cities conducted by mail and telephone from Dec. 12 to Dec. 19.

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After a 24-hour break that sent hordes of people to the malls, the snow is back.

Torontonians were expected to wake up today to heavy snow and bitter winds. And it’s only the first official day of winter.

"The storm is going to bring in some snow and end with very windy conditions," said Environment Canada meteorologist Mitch Meredith.

Those winds could reach 60 km/h by the time it’s over at about noon, making it feel as cold as minus 27 C. About 15 centimetres of snow are expected to fall and visibility is expected to be poor for the duration of the storm.

Police are asking people to stay off the roads if possible. "Give the plows the time to do their job," said OPP Sgt. Dave Woodford.

According to Environment Canada, Tuesday could be nerve-wracking too. More snow is expected for the GTA, with rain to follow on Wednesday.

Yesterday’s sunny, if cold, interlude sent thousands to the malls, hoping to wrap up their Christmas shopping.

Dimitra Klisouris, 28, was originally planning on getting her shopping done today – until she checked the weather forecast individual health insurance plans.

"When we heard about the storm we thought, let’s get it all done now," she said, waiting to meet her brother inside the Eaton Centre.

The mall was packed at 6 p.m. yesterday, but shoppers said they were spending less this holiday season.

"I think I’ve got a little smarter in terms of budgeting. I have a big family – there are eight of us – and I usually spend about $1,000. But I’ve probably cut that in half," said Klisouris.

Rick Monteith and his wife Chris were also on a tighter budget.

"Our jobs are at risk," said Rick Monteith, shopping at The Bay just south of the Eaton Centre. The couple work at the General Motors plant in Oshawa. "We’ve scaled down our Christmas budget."

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The Toronto stock market plunged about 600 points in early trading Monday as tumbling oil prices helped persuade investors to take profits after a huge run-up last week.

New York markets were also hit with profit-taking amid weak expectations for the U.S. holiday shopping season.

Toronto's S&P/TSX composite index fell 601.6 points to 8,669. The sell-off followed a huge surge of almost 14 per cent last week on a revival of TSX oil, financial and mining stocks that had been severely beaten down as the financial crisis deepened during October and November.

The TSX Venture Exchange declined 7.47 points to 758.88.

New York's Dow Jones industrial average fell 288.6 points to 8,540.5 after powering ahead almost 10 per cent last week. The Nasdaq composite index fell 54.97 points to 1,480.6 while the S&P 500 index gave back 37.2 points to 859.05.

The Canadian dollar was down 0.22 cent to 80.62 cents US as oil prices gave up more ground and political turmoil continued in Ottawa.

Statistics Canada reported that economic growth expanded 0.1 per cent in September, which most economist believe was the last month of growth before what could be a prolonged period of decline. The third quarter of the year showed 0.3 per cent growth in gross domestic product.

Sources said the Liberals and NDP have drafted a blueprint for Canada's first coalition government since the First World War, aiming to govern jointly until the middle of 2011. But they would need support from the Bloc Québécois.

Meanwhile, the Conservative minority government on Sunday moved the budget date ahead to Jan. 27.

The energy sector was a major loser in early TSX action, down almost nine per cent as the January crude contract fell $3.80 to US$50.63 a barrel on the New York Mercantile Exchange after OPEC did not cut production at a weekend meeting in Cairo same day payday loans. OPEC meets again Dec. 17.

EnCana Corp. (TSX: ECA) fell $5.50 to $54.50 while Petro-Canada (TSX: PCA) surrendered $4.24 to $29.49.

Financial stocks were down 6.6 per cent ahead of earnings reports from four of the six big banks later this week. Royal Bank fell $2.59 to $40.59 while TD Bank lost $2.69 to $43.31

The gold index pulled back 10 per cent as bullion fell $35.30 to US$780.90 an ounce. Barrick Gold Corp. (TSX: ABX) was down $4.17 to $33.55

Base metals also gave back 10 per cent with Teck Cominco Corp. (TSX: TCK.B) off 59 cents to $5.41.

Fairfax Financial Holdings Ltd. (TSX: FFH) slipped $6.78 to $353.22 after it said it plans to buy up the stake in commercial insurer Northbridge Financial Corp. (TSX: NB) it doesn't already own for $686 million.

On the retail side, initial reports on holiday shopping point to sales better than some retailers and analysts expected, but consumers are cautious and analysts are still forecasting a very difficult season.

Overseas, London's FTSE 100 index fell 2.4 per cent, while Frankfurt's DAX and the Paris CAC 40 slid 2.7 per cent.

Earlier, Asian markets closed lower with the Nikkei 225 stock average in Tokyo down 115.05 points, or 1.4 per cent, at 8,397.22 after advancing 7.6 per cent last week.

Markets in South Korea, Australia and Singapore also fell, while India's benchmark Sensex index reversed early gains and closed with a loss of 2.8 per cent to 8,839.87 in the wake of the terrorist attacks in Mumbai that left 172 people dead.

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Americans began pumping money into mutual funds for the first time in 15 weeks, as global equities started rallying at the end of October, according to a report released Thursday.

Investors poured $2.2 billion into equity-based mutual funds during the seven days ended Nov. 5, compared to an outflow of $9.2 billion the week before, according to TrimTabs Investment Research. The last time stock-based mutual funds saw net gains was during the week ended July 23.

Stocks surged as October drew to a close, leading many investors to put money back into their mutual funds. But the moves may have been premature as markets turned sour earlier this week, said Conrad Gann, president and chief operating officer of TrimTabs.

"Retail investors don’t have the best timing. They basically got burned over the last few days," said Gann.

Over the two days following Tuesday’s presidential election, concern about the state of the economy sent the Dow Jones industrial average down some 929 points, marking its biggest two-day point loss ever.

Downward pressure. Funds that invest primarily in U.S.-based stocks saw an increase of $2.3 billion versus a decline of $7 billion in the prior week. However funds that focus on non-U.S. stocks continued to see declines, with investors pulling out a net $140 million compared to $2.2 billion last week.

"Foreign [funds] have the double whammy of a dollar rebound and the falling market," said Gann Faxless pay advances.

The dollar has gained significantly against most major currencies over the past several weeks as many investors try to hedge their bets against the volatile stock market.

As the dollar increases, the value of foreign funds decreases because the value of the stocks they hold, which are denominated in foreign currencies, goes down, Gann explained.

Bond-based funds saw a net increase of $518 million in investments compared to a decline of $5.9 billion last week, and hybrid funds, which try to strike a balance between stocks and bonds, saw a net influx of $184 million compared to net withdrawals of $2.8 billion.

Meanwhile exchange-traded funds (ETFs), unmanaged bundles of stocks that trade as a single unit on normal exchanges, saw a net inflow of $885 million, down from an inflow of $903 million last week.

Over the past several months, money flowing into ETFs has gotten a boost from the economic weakness, since it allows investors to spread their risk across a whole range of stocks.

Despite the apparent turnaround in mutual fund confidence, "we’ll continue to see outflows," said Gann. The economy is still struggling, especially overseas, he pointed out. 

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BMW (BMWG.DE: Quote, Profile, Research, Stock Buzz) abandoned its 2008 earnings forecast and cut production on Tuesday after a 60-percent plunge in quarterly profit that underscored slowing sales in the troubled autos industry.

The woes facing the world’s biggest premium brand automaker followed the worst month in 25 years for the industry in the United States, BMW’s largest market, including big setbacks for U.S. giants General Motors (GM.N: Quote, Profile, Research, Stock Buzz) and Ford (F.N: Quote, Profile, Research, Stock Buzz).

Automakers are doing what they can to cut output and many are gearing up for a price war as they try to reduce excess inventories before year-end.

“Difficult business conditions and the volatile climate on the market mean that it is as good as impossible from today’s perspective to make a reliable prediction of the earnings outcome for 2008,” BMW Chief Executive Norbert Reithofer said.

“We will, however, achieve a result that is clearly positive,” he said. BMW had previous forecast a group pretax margin of at least 4 percent this year.

BMW fell well short of analysts’ expectations for the three months to Sept 30, with earnings before interest and tax (EBIT) down 60 percent to 387 million euros ($498.4 million) versus an average estimate of 574 million from a Reuters poll of 17 analysts cash til payday.

Revenues fell 8.6 percent to 12.59 billion euros and BMW said it would chop production by at least 40,000 cars, adding to an earlier cut of 25,000. The cuts represent 5 percent of 2007 output.

BMW also took 342 million euros in risk provisions for bad loans and bigger-than-expected declines in the value of vehicles coming off lease in the third quarter and said it could not rule out more this year.

OCTOBER CHILL

Overall U.S. auto sales in October fell by 32 percent to their lowest ebb since February 1983.

That included a 45 percent drop for GM and a 30 percent fall at Ford. BMW’s sales fell by 8.5 percent.

On a per capita basis, GM said October was the weakest month for U.S. auto sales since the end of World War Two.

Europe also suffered, with industry wide sales in Spain off 40 percent and down 19 percent in Italy.

Like BMW, Ford said it was eyeing production cuts, noting it could reduce output in coming weeks by cutting overtime and suspending work at some plants.

An aggressive round of discounting also looms this month and next as automakers prepare to clear 2008 model vehicles using cut-rate financing and other incentives. 

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REYKJAVIK–Iceland has sought to reassure international investors caught in its banking meltdown, saying it aimed to meet its obligations despite the turmoil that has ravaged a once-vibrant financial sector.

British officials were due to hold talks today with Icelandic authorities on dealing with the estimated £1 billion of British deposits trapped in Iceland’s collapsed banks.

"The Icelandic government of course intends to honour its obligations," Prime Minister Geir Haarde told a news conference in Reykjavik, without giving details.

The Dutch government accused Iceland of insufficiently supervising Icelandic bank Landsbanki’s Icesave business in the Netherlands.

A deal to sell most of Landsbanki’s overseas corporate finance and brokerage business to Iceland’s Straumur-Burdaras investment bank fell through yesterday.

Iceland also said it will start negotiations with Russia on Tuesday to secure a four billion euro, $6.3 billion (Canadian), loan.

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The Icelandic government said Monday that it has taken control of the struggling Glitnir bank, marking the first major banking nationalization for the country in the current turmoil.

The government said it bought a 75% stake in Glitnir, the country’s third largest bank, for €600 million euros ($878 million) to ensure broader market stability after it suffered liquidity issues.

Central Bank of Iceland chairman David Oddsson said that Glitnir, which has operations in 10 countries, would have collapsed if the authorities had not intervened.

However, the government said that the bank would continue to operate as normal and that it does not intend to hold its share "for an extended period."

Glitnir itself stressed that its core operations "are solid."

"The board and management of Glitnir have diligently worked at securing the bank’s funding in the past months’ turbulent markets, but unfortunately the bank saw adverse development in the past few days," said Glitnir chief executive officer Larus Welding, who will remain in his position.

"Having the government as an owner strengthens the capital base of the bank and removes all doubt about Glitnir’s financial strength," he added.

The Financial Supervisory Authority said that Glitnir’s capital and asset portfolio is solid and its loan book of good quality payday advance. The capital adequacy ratio will be 14.5% after the government’s action, it said.

Glitnir said that the offer was posed Sunday meeting and the bank’s board voted to accept the proposal at a meeting Monday morning. The bank now plans to call a shareholder meeting to approve the deal.

Trading in Glitnir shares was halted on the OMX Nordic Exchange. 

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LONDON–Lloyds TSB sealed a rescue takeover of HBOS on Thursday to create a dominant British mortgage and savings bank in a $22 billion deal helped through by the government.

A change in competition law ensured the credit crunch did not claim another victim, after HBOS shares were battered in the past week by fears it was struggling to raise funds in wholesale markets.

The focus on HBOS came as other banks around the world staggered under the weight of the crisis and recalled the state bailout of UK bank Northern Rock in February.

Lloyds will offer 0.83 of its shares for each HBOS share, valuing them at 232 pence based on Wednesday's closing prices, or a 58 per cent premium. The deal values HBOS at 12.2 billion pound ($21.7 billion), only a quarter of its value a year ago.

By 1010 GMT, HBOS shares had jumped 44 per cent to 212p while Lloyds shares added 1 percent to 282.25p, nudging the value of the deal to 234p per HBOS share.

"We had expected HBOS would struggle to make a profit through 2010, but we had not expected it would fall victim to the credit crunch," said Sandy Chen, analyst at Panmure Gordon.

"The spectre of another run on customer deposits, combined with the run on wholesale funding that HBOS has been experiencing, was what pushed HBOS into the arms of Lloyds TSB, with the support of the UK government," Chen added.

Lloyds said it expects the deal to boost annual earnings by over 1 billion pounds a year by 2011 through cost savings and boost its earnings per share by over 20 per cent a year.

Cost savings could be even higher and the company may be playing down prospects to avoid a backlash about job and branch closures, analysts said.

Lloyds CEO Eric Daniels will remain as chief executive and Victor Blank will stay as chairman. Other positions, including that of HBOS CEO Andy Hornby, have not been decided.

Lloyds investors will own 56 per cent of the enlarged group.

The UK government said it intends to smooth regulatory approval of the takeover – despite the enlarged group having a 28 per cent share of mortgages – to ensure the stability of the UK financial system credit reports. Alistair Darling, UK finance minister, said he fully supported and welcomed the deal.

Lloyds has courted HBOS previously but regulators in the past would not have allowed a bank with such big positions in mortgages, current account and savings.

The credit crunch has changed that. Darling said the government would change legislation to modify competition laws so that the deal can go through.

Bruno Paulson, analyst at Bernstein, said it left "the UK's banking competition policy in tatters."

"A year ago it would have been very difficult for this deal to have gone through, but we live in unusual times," Daniels told reporters on a conference call.

But he denied it was a government-brokered rescue and said the banks have been in talks for several weeks.

"There shouldn't be any impression this is a shotgun marriage or a forced marriage, this is something that's been looked at for a good long while," he said.

Lloyds said the combination will strengthen its ability to serve UK customers in the current difficult markets.

But it will cut the bank's capital cushion and leave it more reliant on wholesale funding, so there are risks, analysts said.

Lloyds' core tier 1 capital ratio – a key measure of financial strength – will fall to 5.9 percent due to the deal, below the 6 per cent regarded as comfortable.

Daniels said he would target a ratio of between 6 and 7 per cent and will pay this year's final dividend in shares, rebase the dividend next year, and consider asset disposals on top of the cost savings to achieve this.

He declined to comment on what assets could be sold. HBOS's Australian arm Bankwest could be among the businesses on the block, analysts have said.

Daniels said reports that the deal could result in 40,000 redundancies "sound very much on the high side."

Merrill Lynch, Citigroup and Lazard advised Lloyds. Morgan Stanley and Dresdner advised HBOS.

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An Ontario judge has ruled that Bell Canada Inc. has improperly collected millions each year from satellite television customers who are late paying their monthly bills.

In a decision handed down late yesterday, the Ontario Superior Court of Justice sided with a class action suit that claimed a $25 “administrative” fee charged to Bell ExpressVu customers who were more than two months late paying their bills amounted to a criminal rate of interest.

The law in question prohibits annual interest rates in excess of 60 per cent and was originally intended to target loan sharks.

“This goes beyond Bell,” said Paul DeWolf, the suit’s representative plaintiff, in an interview today.

“If this ruling holds, a lot of companies are going to have to reassess their positions.”

DeWolf lives in Braeside, Ont., near Ottawa, and works for Metroland Media Group, a company owned by the Toronto Star’s parent, Torstar Corp.

The class action was launched on behalf of some 33,000 current and former ExpressVu customers that pay the late charge each month. The satellite TV service has about 1.7 million subscribers in total.

Bell, which is expected to appeal the ruling, had unsuccessfully argued that the administration fee reflected the costs it incurred when a customer’s account remained unpaid for two months.

The fee is on top of a monthly interest rate of 2 per cent charged by Bell on overdue amounts free credit report instantly.

The next stage of the class action will be to determine damages.

The original suit demanded ExpressVu cease the practice and repay the money collected since 2003 or, alternatively, pay $100 million in damages and another $10 million in punitive damages. However, most class action suits are settled for far less than the damages originally claimed.

DeWolf said he still expected damages to be in the “tens of millions.”

According to court documents, De Wolf failed to pay his bill by the due date on 47 occasions between January 2001 and May 2006, racking up $226 in “administration” fees.

That means De Wolf failed to pay his bill by the due date nearly 80 per cent of the time, a dismal track record he attributed to poor postal service to his small community and Bell’s billing cycle.

The ExpressVu ruling comes amid other class actions targetting the Canadian telecommunications industry, including one that focuses on the so-called “system access” fees charged by the country’s wireless carriers, including Bell. A Saskatchewan court certified the class action last year.

Another class action, which has yet to be certified, targets the emergency 911 fees charged to wireless subscribers.

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Fannie Mae on Friday posted a much larger-than-expected second-quarter loss and slashed its dividend more than 85 percent to preserve capital as home loan defaults accelerated in the bleakest U.S. housing market since the Great Depression.

Three weeks after U.S. authorities took sweeping steps to support Fannie Mae and its smaller sibling Freddie Mac, the two largest providers of U.S. home mortgage funding, Fannie said its credit costs will keep rising this year.

Fannie Mae Chief Executive Daniel Mudd said the company would likely boost reserves, but said it had not taken advantage of assistance recently made available by the U.S. Treasury and Federal Reserve Bank.

Fannie also said it will cease buying certain risky mortgages that accounted for nearly half of its credit losses in the quarter and set a year-end target for doing so.

Fannie Mae, whose shares dropped more than 6 percent following the earnings news, said its loss totaled $2.3 billion before preferred dividend payments, or $2.54 per share. It was Fannie Mae’s fourth straight quarter of red ink, bringing its cumulative loss over the last 12 months to $9.44 billion before preferred dividends.

The loss reversed a profit of $1.95 billion, excluding preferred dividend payments, from a year earlier cash advance loans. Excluding extraordinary items, the second-quarter loss equaled $2.51 per share, more than two-and-a-half times greater than the average estimate among Wall Street analysts of 98 cents per share, according to Reuters Estimates.

“The key for Fannie and Freddie both, and also for banks, is ‘Do they have the capital to get through the next year or so?’” said David Dreman, chairman of Jersey City, New Jersey-based Dreman Value Management, LLC, a large holder of Fannie and Freddie Mac shares.

“Their revenues are up pretty significantly,” he added. “So if they can hold, if they are not taken under by a wave of defaults now, it’ll be a good business two years out. It looks like they can, but there are a lot of negatives out there too.” 

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