More "Worse than Expected" in US and EU

Economic indicators continue to plunge worldwide. Stock markets, which have already priced in the current dire state of affairs, are actually up a bit on possibilities of stimulus packages.

NEW YORK/LONDON (Reuters) - Dire economic data from the United States and Europe showed the world's two largest economies remain mired in recession. As a further indication of how the crisis that began with bad housing loans in the U.S. has reached all parts of the world, a state-run Chinese magazine warned that rising social unrest would follow rising unemployment.

U.S. data showed new factory orders plunged 4.6 percent in November, far steeper than the 2.5 percent decline analysts predicted. That was further bad news for the manufacturing sector that recorded a 28-year low on a widely watched gauge of activity in December. U.S. durable goods orders also tumbled 1.5 percent in November, according to new data, worse than economists had predicted.

In Europe, a sharper-than-expected fall in euro zone inflation to a 26-month low of 1.6 percent in December knocked back the euro and further supported expectations for a European Central Bank (ECB) rate cut next week. ECB rate-cut expectations were also boosted by data showing the euro zone private sector services economy shrank sharply in December and firms cut more jobs than expected, pointing to a deep recession lasting well into 2009. The Markit Eurozone Purchasing Managers' Index of about 2,000 services companies, from banks to retailers, fell to 42.1 in December from 42.5 a month ago, a new low in the survey's 10-year history. "Sharply contracting new orders, backlogs of work and employment reinforce belief that the euro zone faces an xtremely difficult start to 2009," said Howard Archer, an economist at IHS Global Insight.

A services sector survey for Britain also showed an eighth month of contraction, with the employment component dropping to a record low, while UK retailers warned that rising job losses and plunging house prices would blight trading for months. Adding to Europe's economic woes, a gas pricing dispute between Moscow and Kiev threatened supplies to the continent as Russian gas via Ukraine to southeast Europe and Turkey was halted, pushing British gas market prices up more than 10 percent. Flows were cut to Bulgaria, Turkey, Macedonia, Greece and Croatia, while Italy, Austria and the Czech Republic reported sharp falls. European energy companies receive about a fifth of their gas via pipelines through Ukraine.

Toyota Motor Corp said it would halt all production in Japan in response to plunging demand. With the global downturn hitting automakers particularly hard, Toyota, the world's biggest, said it would shut all its factories in Japan for 11 days in February and March.

But global stock markets rose, with European and Asian shares posting gains for the sixth- and seventh-straight sessions, respectively. The dollar climbed as investors anticipated an economic stimulus package of up to 50 billion euros ($67.4 billion) in Germany and an expected $775 billion proposal from U.S. President-elect Barack Obama. The U.S. Dow Jones Industrial average edged up 0.5 percent.