World leaders urged U.S. President-elect Barack Obama on Wednesday to help build a new economic order and lead the globe out of its worst financial crisis since the 1930s.
Excitement about the historic election of Democrat Obama as the first black U.S. President was tempered by an awareness of the challenges he faces as the world's biggest economy heads toward recession.
"We need to change the current crisis into a new opportunity. We need a new deal for a new world. I sincerely hope that with the leadership of President Obama, the United States of America will join forces with Europe to drive this new deal," said European Commission President Jose Manuel Barroso.
Initial market reaction was muted, with the economic woes remaining the major focus.
The dollar rose against major currencies following its biggest one-day slide in 13 years when investors had switched to higher yielding currencies.
Asian stocks rose but ended off highs and European shares opened lower, with analysts saying a victory for Obama had been largely priced in after recent rises and concerns about the health of the global economy still paramount.
Obama does not take office until January, leaving outgoing President George W. Bush to host a summit of world leaders in Washington on November 15 to discuss the global financial crisis which has its roots in the collapse of the U.S. housing market.
STARK WARNING
That summit will tackle new ways to regulate global financial markets as the world heads into recession.
European Central Bank Executive Board member Juergen Stark was gloomy about the prospects for the 15-nation euro zone's economy.
"The expectation that we would see a recovery around the end of the year has disappeared," Stark told Germany's Financial Times Deutschland in an interview published on Wednesday. "We will have very low growth well into 2009.
Australia's government was just as downbeat, slashing its forecasts for economic growth and its budget surplus.
"If international conditions were to deteriorate further then there could be more to come," the country's Treasurer Wayne Swan said. "This is yet another dramatic reminder that we are not immune to the impact of the global financial crisis."
Australia cut interest rates by a bigger-than-expected 75 basis points on Tuesday and the ECB and the Bank of England are expected to cut their rates on Thursday by at least 50 points.
Bank of Japan Governor Masaaki Shirakawa said risks of economic weakness remained the bank's main concern in the face of the global financial crisis, but warned that too big a cut in interest rates in Japan could distort the market.
TREASURY TASKS
Obama will move quickly to name his top team.
The next Treasury Secretary, who could be named by Obama within days, will inherit one of the hottest seats in Washington, faced both with guiding the $700 billion economic bailout package and the regulatory reform needed to prevent a repeat of the current crisis.
The short list for Treasury likely includes former Treasury secretary Lawrence Summers, former Federal Reserve Chairman Paul Volcker and Timothy Geithner, president of the Federal Reserve Bank of New York.
Obama, whose popular support strengthened on perceptions that he has a better grip on the economic crisis, has advocated a second government stimulus package worth $175 billion that would include money for investments in infrastructure as well as another round of tax rebates.
The U.S. Treasury is expected to announce on Wednesday the return of the three-year note when it sets out plans for borrowing which could total $2.1 trillion in the current fiscal year, to fund its massive bank bailout program.
PAYBACK TIME?
The financial crisis, which stemmed from a U.S. housing market collapse, has redrawn the banking landscape and brought changes to its corporate culture.
Swiss bank UBS AG said its chairman and board may repay previously granted bonuses as part of a report on pay at the company due at a shareholder meeting later this month.
BNP Paribas, France's biggest bank by market capitalization, said third quarter net profit more than halved due to higher provisions tied to the financial crisis.
Italian bankers expect the government to announce in the next few days a package to provide up to 30 billion euros ($38.53 billion) in capital for banks so they can keep lending to companies, the Financial Times said on Wednesday.
The money would be made available in a variety of instruments but may stop short of directly investing in the sector, the newspaper cited several bankers as saying.
