By Daniel Trotta
NEW YORK (Reuters) - China's economy stumbled and European output retreated on Wednesday, while investors held onto hope U.S. politicians would finally agree on a $15 billion bridge loan to Detroit automakers that is seen as crucial to stabilizing the industry.
China vowed renewed measures to reinvigorate its economy after November data showed unexpectedly weakness in both exports and internal demand. Meanwhile trading partners across Europe reported industrial output in decline.
"Global demand for Chinese products is vanishing," said Gene Ma, an economist at China Economic Monitor, a Beijing consultancy. "Secondly, the credit freeze in importing countries has made it hard for Chinese exporters to sell abroad."
European analysts said November and December would be even worse in the latest signs the global financial crisis has shoved leading economies into recession or slowdown.
"Industrial output in the euro zone has fallen into a very deep recession, suggesting that GDP in Q4 could contract even more sharply in Italy, France and Germany than is currently assumed," said Holger Schmieding, a Bank of America economist.
Economists in one survey expect U.S. GDP to shrink 1.1 percent next year.
In Washington politicians were busy at work on a plan to rescue the U.S. auto industry, a major part of the manufacturing base of the world's largest economy.
The White House said the Bush administration and congressional leaders had reached a "good conceptual agreement" on a plan to rescue troubled U.S. automakers but had not yet agreed to a final bill.
Details of the bill that Democrats sent to the White House surfaced. But congressional Republicans, still dissatisfied with how a $700 billion program to stabilize the U.S. financial system was approved in October, offered an alternative plan.
Senate Democratic leader Harry Reid said he hoped the Senate could vote on the measure by the end of the week.
A rescue was needed because a bankruptcy or failure of General Motors Corp, Ford Motor Co or Chrysler LLC would threaten not only jobs but billions of dollars of financial instruments, which experts said raised the prospect of another credit crisis.
STOCKS RISE DESPITE KODAK WOES
Hopes for auto rescue plan helped propel Wall Street higher. The Dow and the S&P 500 were up about 1.4 percent each. European stocks ended flat after Japanese shares closed 3.2 percent higher.
One drag on the market was Eastman Kodak, whose stock was down 10 percent after the photography company said 2008 earnings would fall short of expectations.
Otherwise the corporate world was still shedding jobs in response to dwindling demand.
Global miner Rio Tinto said it was eliminating 14,000 jobs, and Sweden's SKF, the world's biggest bearings maker, announced 2,500 job cuts.
Responding to slower growth, China's top leadership pledged to ramp up public spending and cut taxes to promote domestic demand in the world's fourth-largest economy.
The World Bank predicted China's economy would grow 7.5 percent next year -- far below the expected 9.4 percent for 2008.
Chinese state media have said the authorities would do all they could to "protect eight" -- a reference to the 8 percent growth rate widely thought to be necessary to create enough jobs for the millions of people entering the work force every year.
(Reporting by Reuters bureaus worldwide; Editing by Steve Orlofsky)
