Japan prepared to unveil details of a $100 billion stimulus plan on Wednesday as it seeks to counter weak domestic demand and plunging exports, while aluminium producer Alcoa Inc kicked off the U.S. reporting season with a quarterly loss.
Stock markets from New York to Tokyo and London fell on worries earnings from top companies will be sharply down for some time yet. Prices for oil and industrial metals also fell.
Governments and central banks around the world have been pumping money into the financial system in an effort to free up frozen credit markets, rekindle spending and restore shattered investor sentiment.
But the U.S. Federal Reserve's efforts to revive consumer lending suffered a setback as investors requested just $1.7 billion in loans to buy asset-backed securities, barely a third of the amount sought in the March debut of the programme.
Richard Fisher, the president of the Dallas Fed, said the U.S. economy was grim and unemployment likely to hit 10 percent by the end of the year.
"Presently, the risk is deflationary job destruction," Fisher said in notes prepared for a speech in Japan.
Confidence among U.S. chief executives fell further in the first quarter, setting an all-time low, according to a Business Roundtable survey. Two-thirds of CEOs questioned plan additional layoffs and expect sales to fall over the next six months.
"NASTY" EARNINGS
Alcoa, the first Dow Jones industrial average component to report quarterly earnings, has already cut thousands of jobs, trimmed spending and raised $1.3 billion to help it through the slowdown.
It posted a larger-than-expected loss of $497 million after a slump in aluminium prices, boding ill for the rest of the reporting season.
"There's no doubt in my mind that we are in for a really nasty earnings season," said Keith Wirtz, president and chief investment officer of Fifth Third Asset Management.
"Alcoa's second consecutive quarterly loss is testament to that. We are in the worst phase of this recession right now."
Alcoa's fellow Dow component, General Motors, has racked up billions of dollars in losses as auto sales slump, forcing it to go to taxpayers for a bailout.
The company was now in "intense" and "earnest" preparations for a possible bankruptcy filing, a source familiar with GM's plans told Reuters on Tuesday.
GM, operating on $13.4 billion of government loans since the start of the year, has until June 1 to complete a reorganisation plan or face bankruptcy, Washington has told the company.
Some analysts and policymakers worry the failure of a company as large and far-reaching as GM could have dire repercussions for the broader economy and already weak consumer confidence.
AUSSIE CONFIDENCE UP
In Australia, however, a key measure of consumer confidence unexpectedly surged in April, boosted by a rise in share markets, lower interest rates and the promise of more government support.
"This is a surprisingly strong result," said Bill Evans, the chief economist at Westpac, which undertakes the survey with the Melbourne Institute.
"Concerns about the global economy have eased as share markets boomed," he said, noting the local market had climbed 20 percent from its low for the year.
But after a powerful rally in March, stocks have struggled this week, and fell again on Wednesday.
Japan's Nikkei average closed down 2.7 percent, while MSCI's measure of stocks elsewhere in the Asia Pacific region shed 3.6 percent, outpacing declines on Wall Street overnight.
"I think round one of the rally may be over. Though the longer-term trend for the market is still up we seem to have run out of fuel," said Katsuhiko Kodama, a senior strategist at Toyo Securities in Japan.
"We're also heading into the earnings season, and while it's been predicted to be bad and you can say things are factored in, it's different when you actually have those figures before your eyes."
Hoping to staunch the flow of plunging profits and rising bankruptcies, the Japanese government is putting the final touches on its fourth economic package in the past year.
It plans to detail a $100 billion scheme, around 2 percent of GDP, just as a tumbling current account surplus for February showed the toll the financial crisis is taking on its exports.
Trade data from Germany, the world's biggest exporter, showed a fall in imports outpaced the slide in exports in February, while France's deficit widened as overall trade shrank.
Global trade has been in free-fall since the collapse of Lehman Brothers last September, heightening concerns about global imbalances and rising protectionism.
On Tuesday, a European Union trade panel voted to impose long-term anti-dumping duty of up to 60 percent on imports of Chinese made candles into the EU, sources told Reuters.
