By Emily Kaiser and Jason Subler
WASHINGTON/BEIJING (Reuters) - The United States sold a record amount of debt to help fund its efforts to contain the financial crisis and Beijing's fifth rate cut since September failed to boost Chinese shares, as gloomy economic and corporate reports showed the world economy was stuck in a deep rut.
Oil prices extended their sharp fall to drop further below $40 a barrel on Tuesday, weakened anew by growing signs of dwindling world oil demand.
New Zealand's economy contracted by its biggest amount in eight years in the third quarter, signaling deeper into recession and backing the case for more rate cuts there.
But Chinese markets' response to Monday's 0.27 percentage point rate cut by the People's Bank of China suggested that interest rate moves alone will not be enough to restore confidence in the face of deepening economic woes.
The benchmark Shanghai Composite Index fell nearly 3 percent in morning trade, a day after the central bank announced the rate cut, which was much smaller than the market had anticipated.
"I think China must move quickly and continue to cut interest rates by a large margin in order to avoid deflation next year or stagflation over a bit longer time," said Lu Zhengwei, chief economist with Industrial Bank in Shanghai.
FURTHER JOB CUTS
Final third-quarter U.S. gross domestic product data due later on Tuesday is likely to underscore the ailing state of the world economy as a steady series of stimulus measures and policy moves fail to halt a slide toward the worst recession in decades.
The United States held a record-large $38 billion two-year note auction on Monday, underscoring the ballooning cost of containing the crisis.
The auction drew bids worth more than twice that amount, showing that the government is so far having no trouble attracting sufficient buyers for its debt.
However, even more stimulus is on the way when President-elect Barack Obama takes office next month. His staff is discussing how much money Congress should authorize for a package that is likely to be well over $600 billion, pointing to a massive jump in debt issuance in the coming year.
Companies around the globe will be looking to such moves to help ward off further losses in the wake of shriveling demand, which has prompted many of them slash jobs and investment to cut costs.
U.S. heavy equipment maker Caterpillar Inc said it would cut white-collar pay by as much as half and offer buyouts to some employees as it looks to cut costs during what it characterized as "uncertain times.
Textron Inc, the world's largest maker of corporate jets, said it will eliminate 2,200 jobs worldwide to cope with the downturn.
The world's top carmaker, Toyota Motor Co, is to promote Akio Toyoda to president in April in a bid to improve the firm's performance, Japanese daily Asahi said on Tuesday.
Toyota on Monday forecast its first-ever group operating loss -- 150 billion yen ($1.7 billion) for the year to end-March -- citing a relentless sales slide and a crippling rise in the yen.
(Reporting by Reuters bureaus around the world; Editing by Tomasz Janowski)
