London: Political leaders urged US President-elect Barack Obama on Wednesday to help forge a new economic order to lead the world out of its worst financial crisis since the 1930s.
Excitement about the election of Democrat Obama as the first black US President was tempered by an awareness of the challenges he faces as the world's biggest economy labours in recession.
"We need to change the current crisis into a new opportunity. We need a new deal for a new world," said European Commission President Jose Manuel Barroso.
"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," he added.
Initial market reaction was lukewarm, with the dollar firming but shares on Wall Street expected to fall as attention focused on a sharp world economic downturn.
European shares were also down two percent, while Asian stocks earlier closed at three-week highs.
"The market is maybe reflecting the hard work ahead and difficult economic circumstances new president Barack Obama has inherited," said Keith Bowman, analyst at Hargreaves Lansdown.
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 US housing market.
Rate cuts amid the gloom
That summit will tackle new ways to regulate the world's financial sector as the world heads into recession.
Authorities are trying to soften the impact of the downturn with support for banks, cheaper lending and stimulus measures, which have already amounted to around $4 trillion.
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Germany's Cabinet agreed a package of measures on Wednesday to give Europe's biggest economy a 50 billion euro ($64.2 billion) boost and protect about 1 million jobs, following a 500 billion euro bank rescue package last month.
It includes extra funds for small and medium-sized firms to borrow, tax breaks on new cars and funding for infrastructure projects and building work.
Gloomy data from Britain and the 15-nation euro zone added to expectations of hefty interest rate cuts on Thursday.
British manufacturing output fell for the seventh month running to mark the longest stretch of declines in 28 years.
In the euro zone, service sector activity touched a fresh decade low in October while retail sales declined in September.
The Bank of England and the European Central Bank (ECB) are expected to cut their rates on Thursday by at least 50 points, having cut four weeks ago as part of a coordinated round.
Australia, which cut rates by 75 basis points on Tuesday, slashed its economic growth forecast.
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 appoint his top team.
The next Treasury secretary, who could be named within days, will inherit one of the hottest seats in Washington, faced both with piloting a $700 billion bailout package and the regulatory reform needed to prevent a repeat of the crisis.
The short list likely includes former Treasury secretary Lawrence Summers, ex-Federal Reserve Chairman Paul Volcker and Timothy Geithner, head of the Federal Reserve Bank of New York.
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Obama 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 US 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 bailout programme.
Payback time?
The financial crisis, which stemmed from a US housing market collapse, has redrawn the banking landscape and authorities are pushing for 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.
European bank results did little to lift the gloom, with a recurring trend of falling profits and rising provisions.
France's biggest bank BNP Paribas posted a 55.6 per cent fall in third-quarter profits, Allied Irish Banks cut its earnings per share forecast for the year, and Austria's Raiffeisen Zentralbank said it may ask the government for 2 billion euros.
And wary banks continue to hold off from lending to each other, as they have since the subprime US mortgage meltdown.
Overnight deposits at the European Central Bank hit a new record, suggesting commercial banks are still hoarding cash rather than lending it to peers.
Italy will approve a rescue plan for banks next week, Prime Minister Silvio Berlusconi said at a trade show on Wednesday.
Berlusconi added that "an important Italian bank" would announce an extra 5 billion euros ($6.42 billion) to be made available for loans to small and mid-sized businesses.
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