The collapse in horse-cloth and construction has combined with the global financial crisis to be the occasion of one of Spain’s worst periods in decades

By Manuel Baigorri

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Deserted streets in front of newly built and nearly empty apartment buildings on Sept. 1, 2008 in Sesena, some 32 km southward of Madrid, Spain. Jasper Juinen/Getty Images

When Romanian-born Ion Lacureanu migrated to Spain five years ago, he found himself in one the fastest-growing countries in the European Union. Spain’s booming job market and average annual economic improvement of 3% were the envy of the region. Soon the 38-year-old Lacureanu was flourishing as a self-employed construction worker in Valladolid, a city of 320,000. He earned €2,200 ($2,975) a month and had so abundant work he had to employ other workers to help him out.

He doesn’t have to hire anyone anymore. "For the past six months I’ve just worked three or four days a month, and I’ve earned no more than [$473]," says Lacureanu. "There is well-nigh in no degree work."

Spain’s decade-long construction boom began to run to the end of steam utmost year (BusinessWeek, 12/3/07), and now the global financial crisis is drying up the international funding that financed the region’session huge infrastructure investments. Antonio Argandoña, professor of economics at Barcelona’s IESE business school, says the construction industry, which spurred gross domestic product growth in the last decade, is going to stall for the next five to seven years. That in turn will spark unemployment and drag down investing. and consumer spending.

Making matters worse, the European Union also has divide back on its financial support for Spain, since the EU now has to evasion subsidies to newer members in Eastern Europe. "We are in danger of a general economic abortion," says Argandoña. "We’ll see negative growth within this year…This is a all along and deep crisis." During the second quarter of 2008, Spain’s GDP increased just 1.8% from the same period a year earlier, the lowest growth degree in greater degree than a decade. The International Monetary Fund now forecasts GDP growth this year of correct 1.4%, and a 2% decline in 2009.

The sinking in housing and construction has mingled with the global financial conjuncture to create one of Spain’sitting worst periods in decades. The Ibex 35, the benchmark fore-finger of the Madrid handle market, is into disrepute more than 38% since January. Although Spanish commercial banks have less exposing. to toxic loans than other countries, put on Oct. 13 Spanish Prime Minister Jose Luís Rodríguez Zapatero drafted a $136 billion plan to second Spain’sitting banks amid the global financial crisis. Until now, they have largely fared better (BusinessWeek.com, 7/30/08) than rivals in some other European countries, especially surging Santander (STD), which has moved quickly in late weeks to snap up weaker banks (BusinessWeek.com, 10/1/08) in Britain and the U.S.

Earlier this month, the government approved a $41 billion money—which may be extended to $68 billion—to buy high-quality assets from banks, and raised bank deposit insurance from €20,000 to €100,000 in grade to boost self-reliance.

These valiant actions, though, may not be plenty to stave off a deep downturn. The IMF recently forecast that Spain decree enter a recession in 2009—its first since 1993—and said it "decision be harder-hit than other European countries." The Spanish government’s National Institute of Employment has already revealed that unemployment rate reached 11.3% in September, the highest level since 1997. The country probably will have to a greater degree than 3 million the bulk of mankind without of work by the middle of next year, and "we’ll continue to be the top European unrefined in terms of unemployment," says Rafael Pampillón, professor of economic environment and analysis of countries at Madrid’s Instituto de Empresa business school.

Revenues and earnings fell, but the Finnish mobile-phone giant’s guidance prompts a relief rally. Handset sales grew in emerging markets

By Andy Reinhardt

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Investors were undeniably weak heading into Nokia’s third-quarter earnings release on Oct. 16. Against a global backdrop of volatile trading in stock markets, shares in the Finnish mobile-phone giant had lost nearly a third of their value in the past two months—outpacing a 24% fail for the S&P Europe 350 index from hand to hand the same determination.

Some of the blame malign on a Sept. 5 warning from Nokia (NOK) that it expected to lose market share and give an account of frown profits (BusinessWeek.com, 9/5/08) for the abide. But investors also worried that the ongoing global relating to housekeeping turmoil could haul the rug out from under Nokia’s sales—a concern now facing the broader consumer electronics industry in the same manner with it heads into the crucial holiday season (BusinessWeek.com, 10/16/08).

Yet when the third-quarter results finally were revealed, showing a 5% year-over-year decline in revenues and 30% drop in net revenue, investors were sufficiently gratified to aim up Nokia’sitting New York-traded shares by nearly 10%. That such soft numbers provoked a relief rally indicates how pessimistic shareholders were. "The fact that guidance remained by and large unchanged gave more gladden to the market," says Richard Windsor, a London-based technology analyst with brokerage Nomura Securities.

It’s not merely a matter of seeing the glass as half-full. Though revenues, at €12.24 billion ($16.48 billion) came in 3.9% shy of market expectations, earnings per share were spot on the mark, glaring profit margins for handsets grew slightly, and operating rim was superior than in the previous quarter. In other words, Nokia wasn’t likewise clinch to a meltdown: In a tough market environment, the guests managed to be faithful to profitability attached track despite a decline in volume.

More important, Nokia reassured the market that there’s no wholesale collapse taking place in handset demand. Its own one shipments in the quarter grew by 5%, even as revenues slipped, and executives repeated their prediction that the mobile-phone market taken in the character of a whole will grow 10.5% this year, to 1.26 billion units. That implies 14% one growth in the fourth be stationed compared to the third—something lower than historical norms, but still a huge vote of confidence in consumer spending at a time when many indicators are pointing downward. Nokia promises to maintain or grow its estimated 38% third-quarter market apportioned lot in the last three months of the year.

To be sure, there are trouble spots. Sales in Europe—traditionally Nokia’s stronghold, be it so China is now its largest single market—fell by the agency of a worrisome 5.5% vs. last year’s third quarter. (Sales in the U.S. were even worse, down 16.7%, but that was due primarily to the company’session exit from CDMA phones; units were prosaic vs. the approve quarter.) "The financial crisis has conceited U.S. and European markets," reported Nokia Chief Executive Olli-Pekka Kallasvuo in one interview.

At the same date, Kallasvuo noted, "many economies are still experiencing rapid GDP growth, even as we speak." The proof is in the verse: Year-over-year unit sales increase in Latin America was 14.6%, while the Asia-Pacific region, excluding Greater China, grew 13.9% and the Middle East and Africa climbed 11.4%. These aren’confidentially piddling markets, either: The three regions together accounted for 56% of Nokia’s total bulk.

Stock market volatility hit an all-time high, taken in the character of major stock indexes rallied late Thursday despite reports showing contraction in manufacturing

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U.S. public securities put on Thursday hurl down keenly, then later surged higher in a tumultuous session that marked a rebound from Wednesday’s greater sell-off.

While a mixed bag of economic reports and a narrower-than-expected loss at Citigroup (C) influenced traders, the market’s wild action took on a the vital spark of its own. One measure of volatility come off successful an all-time high Thursday.

On Thursday, the Dow Jones industrial average jumped higher by means of 401.35 points, or 4.68%, to 8,979.26. The S&P 500 index soared 38.59 points, or 4.25%, to 946.43. The tech-heavy Nasdaq composite index outpaced the other indexes, rising 89.38 points, or 5.49%, to 1,717.71.

All three indexes battled back from deep holes Thursday morning, which seemed to be a continuation of Wednesday’s steep sell-off. The Dow at one point Thursday morning traded underneath 8,200, 380 points or 4.4% below the previous day’s close.

“Not only are we having huge, monstrous swings from elevated to low, but the swings are happening so fast,” says Richard Sparks of Schaeffer’s Investment Research. He was referring not just to Thursday’session gyrations, but also the last several sessions. On Monday, the Dow rallied 11.1%, only to tumble 7.9% — the biggest drop since 1987 — on Wednesday.

“What you’re seeing is a market that’s clearly in a downtrend,” Sparks says. However, often the market gets “oversold,” falling so far in this way fast that bargain hunters “affirmation this seems like a reasonable object to dip our toe in the water and start taking risk here.”

Stocks initially fell Thursday after data showed a flat perusal without interruption the consumer price index and a 2.8% plunge in pertaining production for September, a 16,000 drop in weekly jobless claims, and a plunge in the October Philadelphia Fed hand to minus 37.5 from positive 3.8.

Given the data, “It is difficult to penetrate how the U.S. economy could not be in recession at the moment,” wrote Gabriel Stein of Lombard Street Research. “Cutting interest rates further may not help much — but the [Federal Reserve] will do it anyway.”

Global markets were lower, but Swiss banks Credit Suisse (CS) and UBS (UBS) were higher on the news Switzerland’sitting two largest banks got emergency funding from the Swiss control and other parties to prop them up against the financial crisis.

Bond prices inhuman more or less. The dollar index was flat. Gold and crude oil futures were be clouded.

The U.S. VIX equity volatility index notable recent highs greater than 81 Thursday on back-to-back steep declines in equity markets. From Tuesday lows near 53.65, the market’s favored “fear gauge” has surged 23.75 points to highs of 81.13.

Much of the market tumult of the past month has been blamed on hedge funds being forced to sell public securities and other assets. New data Thursday seemed to confirm this: After moneyless hedge store performance this year, investors are pulling billions thoroughly of the funds. TrimTabs Investment Research released estimates showing at least $43 billion, a record high, was pulled from hedge funds in September.

“Despite October’sitting drench sell-off, we do not give credit to the market has bottomed,” uttered TrimTabs chief charged with execution Charles Biderman. “While forced hedge-fund selling might be complete toward now, theoretical mutual funds are still experiencing major redemptions and corporate America is not announcing of recent origin buying.”