By Angus MacSwan
LONDON (Reuters) - Britain and Sweden made dramatic interest cuts on Thursday to shore up their economies in the face of worsening financial news and Europe was expected to follow.
Sweden cut interest rates by a record 175 basis points and the Bank of England lopped off 100 basis points.
France meanwhile unveiled a 26 billion euro ($32.9 billion) stimulus plan for its faltering economy as unemployment rose, the latest European country to open state coffers to fight the downturn.
With the United States, Europe and Japan now in recession and other countries sliding that way, data showed a mounting pattern of job losses and corporate woes across the globe.
But the powerhouse emerging markets of China and Russia expressed confidence they could weather the storm.
Sweden and Britain fought back by hacking at interest rates. In a deeper than expected cut, Sweden's central bank chopped off a record 175 basis points to 2.0 percent to prevent its economy sinking further into recession.
The Riksbank said it expected rates to remain at that level over the coming year. There was an "unexpectedly rapid and clear deterioration in economic activity since October," it said.
The Bank of England cut a full percentage point, taking rates to 2.0 percent, their lowest level since 1951.
Analysts had widely expected the move following business indicators suggesting Britain's economy could be heading for an even deeper recession than most people had predicted.
The European Central Bank was due to announce rate cuts for the eurozone later on Thursday and analysts expect a 50 basis point reduction.
U.S. interest rates will fall below 1 percent if the Fed cuts again as expected later this month.
Earlier on Thursday, New Zealand sliced interest rates by a record 150 basis points to a five-year low of 5.0 percent and said it would probably have to cut rates again.
Indonesia also made a surprise cut in its key interest rate, by 25 basis points to 9.25 percent, the first since December 2007 as the government sought to protect the economy.
European stocks reversed early losses to rally on Thursday, rising for the third session in a row as investors hoped the deep cuts would help soothe the global economic slump.
"It could help find a bottom for stocks, but to say if the real floor is in sight, it's too early for that," said Achim Matzke, a European analyst at Commerzbank in Frankfurt.
Asian shares fell as investors braced for a sharp turn lower in the global economy and sought safety in U.S. government debt, pushing benchmark yields to five-decade lows. Wall Street was seen opening broadly unchanged, breaking a two-day rally.
FRENCH STIMULUS
French President Nicolas Sarkozy announced a stimulus package to help France withstand the crisis just as the government announced that the unemployment rate rose in the third quarter to 7.7 percent.
The 26 billion euro ($32.9 billion) plan will target investment projects rather than directly aiding consumers, earmarking money for infrastructure and support for local authorities as well as moves to help the ailing auto industry.
It is expected to boost French growth by around 0.6 percent next year, but will also push the deficit to 3.9 percent of GDP against a previous target of 3.1 percent.
In Zurich, Swiss bank Credit Suisse said it was cutting another 5,300 jobs as it revealed a net loss of about 3 billion Swiss francs ($2.5 billion) in October and November.
That will add to the more than 100,000 jobs that have been lost in the financial industry as banks across the world cut costs to cope with the worst crisis since The Great Depression.
CHINA STILL CONFIDENT ON GROWTH
The crisis has devastated industries, including the U.S. auto industry, which is lobbying Washington for a bailout.
Prime Minister Vladimir Putin of Russia -- which along with China, Indian and Brazil was a dynamic emerging market in the heady days before the downturn -- blamed the United States for "infecting" leading world economies with the crisis.
He predicted Russia would survive with "minimal losses" and pledged to maintain rises in social spending and avoid a sudden devaluation.
In China, Zhou Xiaochuan, head of the People's Bank of China, expressed confidence his country could sustain economic growth and financial stability but said "timely, effective and pre-emptive measures" were needed.
China cut interest rates last week to spur the economy and Australia and Thailand followed this week to avoid recession.
Japanese companies slashed spending, showing the economy was in a deeper recession than the government estimated.
(Additional reporting by Reuters bureaus worldwide; writing by Angus MacSwan; editing by Philippa Fletcher)
