By Daniel Trotta
NEW YORK (Reuters) - MICROSOFT (MSFT.NQ)reported disappointing earnings and plans to cut up to 5,000 jobs, unsettling markets on Thursday until the White House promised to move quickly on an $825 billion (594 billion pounds) economic stimulus package.
Investors were already digesting negative U.S. jobless data and a report that housing starts and permits fell to a record low in December when Microsoft shocked the market by reporting its results before the opening bell -- hours ahead of schedule.
The tech giant missed already lowered expectations and said it would stop offering profit forecasts for the rest of the fiscal year. Its results contrasted with those of IBM and Apple, which both beat forecasts earlier this week.
The news came as Asia's two largest economies wobbled under the strain of the global financial crisis, while in Europe top mobile phone maker Nokia reported a greater-than-expected dive in fourth-quarter earnings and warned that market volumes would shrink 10 percent this year.
China reported economic growth slowed to 6.8 percent in the fourth quarter, dragging down the 2008 rate to a seven-year low of 9.0 percent, and Japan's central bank predicted two years of deflation.
The combination of negative news rocked stocks, bonds and currencies. Microsoft stock fell as much as 11 percent, hitting an 11-year low.
But the Nasdaq and the Dow came off session lows after President Barack Obama's chief spokesman held his first briefing since the change of power on Tuesday.
"We have to do everything in our power and Congress does too to get that (stimulus) package moving, to get that money into the economy ... to give the American people some confidence going forward," Robert Gibbs told reporters.
In late day trading, the tech-heavy Nasdaq was down 2.8 percent and the Dow was off 1.7 percent.
OIL DEMAND WEAKENS
Weekly official data showed U.S. crude oil and gasoline supplies rose sharply more than expected in another signal of weak demand, trimming more than $2 off the price of a barrel.
"I don't know how many ways you can say it's bearish," said Phil Flynn, an analyst at Alaron Trading in Chicago. "It's going to take a major turnaround in the economy to burn off all this oil."
Timothy Geithner's nomination as U.S. Treasury secretary won approval from a Senate panel, although it was unclear when the nomination would go to the full Senate for a vote.
Geithner signalled a more aggressive tone towards China when he told the panel President Barack Obama believes China is manipulating its currency.
ASIA UNDER STRAIN
Indicating a return of the deflation which ravaged the Japanese economy in the 1990s, the Bank of Japan cut its growth forecasts, predicting the world's No. 2 economy would contract for two full years until March 2010.
Earlier data showed Japanese exports plunged a record 35 percent in December from a year before.
China's statistics bureau said the financial crisis was spreading and China would aim to stimulate domestic demand.
"The deceleration of growth (in China) is beyond the market's consensus, which presents a huge challenge to this year's growth target of 8 percent," said Jin Yanshi, chief economist at Sinolink Securities in Shanghai.
South Korea said its economy suffered its second-largest contraction on record in the fourth quarter, pushing Asia's fourth-largest economy closer to its first recession since the regional financial crisis a decade ago.
In France, consumer spending, the driving force behind the country's growth last year, fell a larger-than-expected 0.9 percent on the month in December.
Separately, the Bank of France said it expected negative inflation in the euro zone and the United States for one or several months this year, but this would not amount to deflation.
"Once the shock of the fall in energy and food prices -- which could lead to negative inflation rates during certain moments in mid-2009 -- has been absorbed, the evolution of prices should go back into positive territory from next autumn," the Bank said in a report.
(Reporting by Reuters bureaus around the world; Editing by Brian Moss)
