LONDON - WEAK economic readings from China, Japan and Britain and a grim corporate outlook worldwide reinforced fears on Tuesday of a prolonged recession, prompting investors to look to a world leaders' summit for solutions.

Chinese import growth slowed in October and inflation fell to a 17-month low as domestic demand cooled, making it likely Beijing will cut interest rates soon to back up the government's new economic stimulus plan.

'The increasing risk of deflation will make the central bank more aggressive in loosening monetary policy,' said Mr Hu Yuexiao, an analyst with Shanghai Securities.

In Japan, exports fell nearly 10 per cent in the first 20 days of October, corporate bankruptcies jumped 13.4 per cent year-on-year and sentiment in its service sector hit an all-time low, all signs the world's second biggest economy was teetering on the brink of recession.

German analyst and investor sentiment about the outlook for Europe's largest economy improved this month but remained gloomy with the nation probably already in recession.

The ZEW survey, which measures the ratio of optimists to pessimists, rose but still read -53.5, reflecting a large preponderance of the latter.

British retail sales fell by the biggest amount in more than three years last month, and a housing industry survey showed home sales slumped to their lowest level in at least 30 years.

'These are seriously poor numbers, especially in the run-up to Christmas,' Stephen Robertson, director general of the British Retail Consortium, said of the sales data.

The worst financial crisis in 80 years, prompted by huge banking losses in the U.S. housing market, has fostered a broad economic downturn, with even fast-growing China proving not to be immune.

Brown demands summit action
The credit crunch has seen banks clam up on lending to each other, businesses and households for over a year now.

Investors are looking to a summit of world leaders in Washington on Saturday for new solutions, following moves worldwide to cut interest rates, kickstart money markets and recapitalise banks, at a cost of more than $4 trillion (S$6 trillion).

'We need monetary and fiscal policy coordination across the world ... a broad, concerted economic response is now urgent,' British Prime Minister Gordon Brown told a news conference. 'The second priority is that we agree a timetable for measures that will clean up the failings in our banking system.'

But officials are downplaying the likelihood of dramatic measures and aides to US President-elect Barack Obama - who world leaders have urged to make the credit crisis his number one priority - said he would not attend the Nov 15 summit.

Many in Europe want a root-and-branch reform of financial regulation but US officials have sounded more reluctant.

'Major reactions in the market may be delayed until after the outcome of the G20 meeting at the weekend,' said Mr Hideki Amikura, deputy general manager of the forex section at Nomura Trust Bank.

Mr Obama is expected to spend hundreds of billions of dollars in a fiscal stimulus package, once he takes power in January.

Separately, the regulator for Fannie Mae and Freddie Mac, which guarantee nearly half of all US residential mortgages, will announce on Tuesday new steps to mitigate home loan foreclosures, according to sources familiar with the plans.

Corporate Palin
Inevitably, companies are not escaping unscathed.

Vodafone, the world's largest mobile phone company by revenues, cut its full-year revenue outlook for the second time in four months but said it would maintain profits by cutting 1 billion pounds (S$2.3 billion) of costs.

Samsung Securities Co, South Korea's biggest brokerage, reported a 69 per cent fall in quarterly net profit on the back of falling financial markets.

The world's largest hotelier, InterContinental Hotels, posted a 14 percent rise in third-quarter profits but said it saw a sharp deterioration in October market conditions.

Japan's Nikkei share index dropped 3 per cent, European stocks shed 2.3 per cent and US stock futures pointed to a weaker start on Wall Street in response to the worsening corporate outlook.

Monday's optimism, sparked by China's nearly $600 billion (S$899 billion) stimulus package, quickly evaporated.

'Worrying corporate news from the U.S. plus suggestions that the recession will be longer and deeper than previously thought are adding to the downside,' Mr Matt Buckland, dealer at CMC Markets, wrote in a note.

Deutsche Bank said the equity value of General Motors was now zero, sending its stock to a 62-year low, and analysts said Goldman Sachs could post its first quarterly loss. -- REUTERS