Global stocks at 5-1/2 year lows

World stocks dropped to 5-1/2 year lows and oil hit 22-month troughs as investors reacted to dire Federal Reserve warnings on the economy and fears about the viability of major U.S. auto makers and bank giant Citigroup.

Federal Reserve officials slashed economic growth forecasts through 2009, with the lower range of the Fed’s central tendencies forecasting the U.S. economy could shrink by 0.2 percent.

At least one among household names General Motors Corp, Ford Motor Co and Chrysler LLC is at risk of bankruptcy if a last-minute bail-out plan fails.

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The plight of U.S. automakers highlighted the increasing damage which the world’s financial crisis is inflicting on the real economy.

“We have contracting economic growth, falling corporate profits, and increasing unemployment which is filtering through to every part of the economy,” said Henk Potts, investment manager at Barclays Stockbrokers.

• A d v e r t i s e m e n t

The MSCI world equity index fell 2.3 percent to 197.90, its lowest since May 2003, driven lower in Asia after data showing Japan’s exports to Asia fell for the first time in six years.

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