Tuesday, November 25, 2008

Obama May Delay Tax Rise

President-elect Barack Obama may consider delaying a campaign promise to roll back tax cuts on high-income Americans as he works on a huge stimulus plan to counter the worst economic crisis the world has faced in decades.The policy moves by the Obama team came as Citigroup, the second-largest US bank by assets and one of the best-known American financial institutions, was struggling on Sunday night to restore confidence after its share price dropped 60 per cent last week.

The Wall Street Journal reported that Citigroup was nearing agreement with US government officials on the creation of a separate "bad bank" that would house some of its potentially toxic assets.Meanwhile, the 21 members of the Asia-Pacific Economic Cooperation forum, which includes the US, Japan and China, pledged at the end of a two-day summit in Lima that they would take quick and decisive action as they seek to reduce the impact of the recessionary conditions sweeping many economies.And diplomats also said there was a high probability the World Trade Organization would hold a ministerial meeting next month to seek a breakthrough in the stalled Doha round of global trade talks.

But the politicians are up against a steady drumbeat of grim economic and corporate news. On Friday, figures from the euro zone and Japan are expected to show increases in jobless rates, and on the same day the traditional start to the US holiday shopping season promises to be one of the most wrenching for retailers in recent memory.The National Institute of Social and Economic Research forecast early on Monday that the British economy will shrink by 1.5 per cent next year, and for a total six quarters in a row, with a recovery not starting until early 2010.

And Canadian Finance Minister Jim Flaherty said Canada's economy may be in a "technical" recession in the last quarter of this year and the first quarter of next year, the first time the Conservative government has conceded that possibility.Such news will be vying with any positive investor sentiment created by Obama's moves as global financial markets open on Monday.

Early indications were slightly encouraging for US stock market investors at least, with US stock index futures opening a bit higher. The benchmark S&P500 index futures were up 4.50 points at 796.50 in early Asian trading, though Australian stocks were lower in early trading.

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