Even Dubai Tightens its Belt

01/15/2009 3:32 pm EST

Focus: GLOBAL

Nancy Zambell

Editor, Wall Street's Best Investments and Wall Street's Best Dividend Stocks

Now we mere mortals can stop feeling so bad about the sad state of our real estate holdings. Even oil-rich Dubai is coping with falling property prices. Fears of more bad economic news to come have delayed the launch of Burj Dubai, which is slated to become the world’s tallest building.

Nakheel, the skyscraper’s state-owned developer, announced that it is halting construction for a year, putting plans for the building—said to be taller than ten American football fields—on hold.

Well, they certainly are in good company, as more governments around the globe are still offering bailout after bailout in an attempt to stem the worsening economic and financial crisis.

The UK is even getting creative with its bailouts. The most recent one includes £10 billion for working capital for small firms, and the government is even considering ways to help consumers secure automobile loans.

Apparently, the UK banks—just like those in the US—have not been too concerned with sharing their previous government cash infusions with their customers, prompting the governments to try again.

However, one bank, HSBC (NYSE: HBC), among the UK’s biggest lenders and Europe’s largest bank, is stepping up to the plate, although in a largely symbolic gesture. HSBC is offering homeowners a two-year discount rate of 2.99%, but only to its best customers with significant accounts and big salaries.

I guess you have to start somewhere. And not a moment too soon. But HSBC has problems of its own, with analysts at Morgan Stanley (NYSE: MS) predicting that the bank may need to come up with as much as $30 billion in capital and may even halve its dividend.

Meanwhile, more UK firms have announced job cuts totaling more than 5,000, including Barclays (NYSE: BCS); automaker Jaguar Land Rover, cutting 450; and music, games and DVD retailer Zavvi, which announced the closure of 18 more stores.

Stateside, troubled cell phone maker Motorola (NYSE: MOT) announced another round of job cuts, while rumors swirl that the axe is about to fall even at mighty Microsoft (Naqsdaq: MSFT).

Additionally, the largest drug manufacturer in the world, Pfizer (NYSE: PFE), said it will reduce its laboratory workforce by 800 research scientists in the UK and US.

There’s more. Major bankruptcy petitions were filed by Nortel Networks (NYSE: NT), North America's biggest telephone equipment manufacturer, regional department store chain Gottschalks (OTC: GOTT.PK), and clothing retailer Goody's. Some of you may remember Nortel hitting $900 during the tech boom; today, you can buy the shares for 32 cents. You can count on more layoffs there, too.

In additional news from Europe, Deutsche Bank (NYSE: DB), Germany’s largest bank, announced a profit warning that took analysts by surprise, confessing that in the fourth quarter of 2008, the bank lost some €4.8 billion (£4.4 billion).

So, it’s no surprise that world markets are having a tough time digesting hit after hit of bad news. In Wednesday’s trading, the FTSE 100 closed off 218.51 points, for its sixth straight decline, down 5.8% in the New Year. And that’s after dropping 31% in 2008, its biggest decline since the index began in 1984.

Germany reported that its economy continued shrinking in the fourth quarter of last year. Combined with plummeting euro zone industrial output in November, pundits expect further sharp rate cuts when the European Central Bank meets tomorrow.

Following that happy news, the FTSEurofirst 300 also fell, by 4.3%.

The Nikkei offered a small bright spot, with a 0.3% rise on Wednesday, but don’t expect the good tidings to last, as forthcoming earnings at major Japanese corporations are anticipated to be dim. Let’s hope 2009 doesn’t turn out as badly as 2008, when the Nikkei fell 42%.

And the Tokyo Stock Exchange reported that for the first time in eight years, its past dependable foreign investors were actually net sellers of shares on the Tokyo, Osaka, and Nagoya exchanges, dumping 3.71 trillion yen ($41.47 billion) worth of shares in 2008.

But all is not lost. Results of a survey from global consulting firm Watson Wyatt reported that fund managers are now predicting that equity markets will get back to historical return levels within three years. Hmm, are these the same managers that rushed their clients into overvalued emerging markets and ignored warnings of the coming financial crisis?

Still, our contributors are trying to make sense—and money—amid all this gloom. David Fuller, global strategist and writer for FullerMoney, offered a comprehensive summary of where global markets stand, technically speaking.

Peter Shearlock, contributor to The IRS Report, reviewed a couple of UK banks that he finds appealing, and Roger Conrad, editor of Canadian Edge, recommended a Canadian health care trust whose acquisitions are creating handsome yields.

Have a good and profitable week.

Nancy Zambell edits Global Investing for MoneyShow.com. Her opinions are her own and not necessarily the views of InterShow or MoneyShow.com.

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