China and the United States sparred on Friday over how to handle an economic crisis that has forced central banks around the globe into a series of dramatic interest rate cuts.
Figures due on Friday were expected to show the sharpest U.S. job losses in 26 years, underlining the severity of a downturn caused by the worst financial crisis since the 1930s.
Canada registered more job losses in November than any other month since June 1982, figures released on Friday showed.
Sharp labour market weakness would add urgency to a bid by executives of the cash-starved U.S. auto industry who are in Washington pleading for a bailout.
Global sales at BMW, the world's top premium carmaker, plunged by a quarter in November, and Honda backed out of Formula One motor racing on Friday, vividly demonstrating the problems facing the industry.
Passenger car sales in China fell more than 10 percent in November from the previous year.
With many developed countries either in recession or heading that way, central banks have cut interest rates close to the bone and attention is now starting to focus on what happens if they get to zero.
Against the bleak economic backdrop, signs of tension marked two days of talks between the United States and China.
The Americans fretted that China might be losing the stomach to let its currency keep rising in value and Beijing voiced concern about Washington's management of the world's largest economy — in which China has a huge financial stake.
US. Treasury Secretary Henry Paulson described the talks as "robust" and characterised by "straightforward back-and-forth" exchanges.
Assistant Chinese Finance Minister Zhu Guangyao, asked whether Beijing would keep buying U.S. debt, responded by urging Washington act to protect China's financial interests.
"We hope the U.S. side will seriously consider the Chinese side's concern and protect the interests of Chinese investors," Zhu told a news conference.
Among the few concrete results of the two-day meeting, the governments agreed to make an extra $20 billion of credit available to finance U.S. and Chinese exports to developing countries that are struggling to get access to trade credit.
TAX CUTS, SPENDING HIKES
Investors have been especially sensitive about the fate of the U.S. automobile industry, the failure of which would hit a chain of parts suppliers and financiers that spans the world.
General Motors Corp and Chrysler LLC told sceptical lawmakers they were open to restarting merger talks to secure aid and prevent job losses.
Paulson said the failure of any major U.S. car maker "would be a bad thing."
Interest rate cuts, higher government spending and tax cuts have been introduced to try to restart stalling economies.
Germany's upper house of parliament on Friday approved a package of measures designed to boost Europe's biggest economy as data showed manufacturing orders plunged in October after a record decline the previous month, pointing to a deepening recession in Europe's biggest economy.
The government says the package is worth 31 billion euros ($39.6 billion) over two years, but critics say it is not radical enough.
Sweden unveiled $1 billion worth of stimulus measures to help the job market and the construction sector and also faced criticism in financial markets for taking too cautious an approach given the scale of its troubles.
The International Monetary Fund (IMF) has also bailed out several developing countries.
Turkey is expected to seek a loan agreement with the IMF amounting to $25 billion, government sources told Reuters.
TO ZERO AND BEYOND
The U.S. economy, in the thick of a year-long recession, probably shed 340,000 jobs in November, according to economists polled by Reuters. The data will be released at 1330 GMT Friday.
Ahead of the U.S. employment data later on Friday, dealers priced in a 3-in-5 chance the Fed would cut rates by 75 basis points to 0.25 percent on Dec. 16.
But policymakers have stressed official rate cuts are not having the impact they should because banks are not passing them on or lending freely — begging the question, what to do next?
The Bank of England is considering buying up government debt and flooding markets with cheap cash, an unsourced report from The Daily Telegraph newspaper said.
A chorus of Federal Reserve watchers expect it to lower its key fed funds rate to zero by January and to expand quantitative measures to pump more liquidity into markets, echoing efforts by Japan to revive its economy in the 1990s.
Asked about quantitative easing, ECB President Jean-Claude Trichet said on Thursday: "If new decisions are needed we will take new decisions."
The FTSEurofirst 300 index of top European shares was down 2 percent on Friday. The benchmark has lost more than 45 percent so far this year. Oil prices traded around $44 a barrel, not far off the lowest in about four years.
