TOKYO/LONDON (Reuters) –
Major world banks showed the strain of economic crisis on Tuesday, with Britain's Barclays altering its fund-raising plans to quell shareholder anger and profits in Japan's largest bank tumbling.
Japan's economy minister said recession in the world's second-biggest economy could last longer than feared and falling UK inflation, and the prospect of the same in the United States, paved the way for further interest rate cuts.
The crisis, which began with a collapse in the U.S. housing market undermining major financial institutions, also showed further signs of hitting industry and retail.
Barclays, facing shareholder ire following a decision to take 5.8 billion pounds from Middle East investors on terms tougher than the British government offered, canceled this year's executive bonuses, as U.S. investment bank Goldman Sachs and Swiss bank UBS have done.
It also said Qatar Holding LLC and Sheikh Mansour Bin Zayed Al Nahyan would each make up to 250 million pounds ($372.9 million) of reserve capital instruments available to existing shareholders -- effectively offering the prospect of enjoying some of the higher rates of return agreed to Gulf investors.
Barclays, one of the four biggest UK banks, had declined to accept any capital from the government under a 37 billion pound bailout, wary of conditions imposed on their operations.
The crisis has taken a firm hold in Asia too.
Japan's biggest bank, Mitsubishi UFJ Financial Group, announced first half profit had tumbled 64 percent and stuck to its recently lowered full-year forecast, hit by recession at home and losses on its stock portfolio.
Australia's biggest investment bank, Macquarie Group, said it was heading for its first fall in annual profit in 17 years.
HSBC added to the employment gloom, saying it would cut a further 500 staff in Asia, mostly in Hong Kong, due to deteriorating economic conditions and caution about next year.
Citigroup Inc, the second biggest U.S. bank, revealed plans on Monday to cut 52,000 jobs by next year, the second-largest corporate lay-off plan in history.
In Britain, already officially in recession, inflation dropped to 4.5 percent in October from 5.2 the previous month.
The larger than expected fall heightened expectations of a substantial cut in the UK's 3.0 percent interest rate next month to stimulate the economy and temper growing fears of deflation, following a dramatic 1.5 percentage point cut this month.
U.S. producer prices, due later, are expected to show pipeline inflation pressures there dropping sharply.
In a further sign of the crisis spreading to the broader economy, major British retailer John Lewis Partnership's department store sales fell 14 percent year-on-year in the latest week, according to the Daily Telegraph newspaper.
British building supplies company Wolseley announced a slew of layoffs and shop closures. Property developer Barratt said its forward order book was 43 percent smaller than the previous year.
Politicians are seeking ways of stimulating demand, possibly by tax cuts, while others resort to more innovative measures.
Taiwan said it would issue shopping vouchers worth T$3,600 ($108) to its citizens. Premier Liu Chao-shiuan said the plan was expected to contribute 0.64 percent to GDP.
In Washington, lawmakers argued over a proposal by Senate Democrats for a $25 billion bailout loan for the auto industry to stave off an even wider economic collapse.
"The reason people think failure could be cataclysmic is that there are so many companies that are tied to the auto industry," said Marc Pado, U.S. market strategist at Cantor Fitzgerald & Co.
Automakers have been hit by a collapse in consumer spending, triggered by a housing crash and worsened by rising unemployment. Officials say even with major stimulus measures in place, it will take a long time for the U.S. economy to recover.
"There's going to be stress in the capital markets for a number of months here because housing prices are still declining and I think it's moved beyond housing," Treasury Secretary Henry Paulson said at a conference.
Paulson and Federal Reserve Chairman Ben Bernanke will testify to Congress later on the $700 billion U.S. bailout plan.
Shares fell, extending Monday's losses, as the Citigroup job cut programme doused expectations for a financial sector recovery in 2009.
European shares dropped 1.7 percent. Japan's Nikkei shed 2.3 percent.
(Additional reporting by Reuters bureaus worldwide; Editing by Mike Peacock)