A Look At Economic Developments Around The Globe

A look at economic developments and activity in major stock markets around the world Monday:

BEIJING China's main stock index sank 6.7 percent on heavy selling of market heavyweights triggered by renewed worries banks will cut back on the lavish lending that spurred frenzied gains until earlier this month.

The benchmark Shanghai Composite Index lost 192.94 points Monday to 2,667.75, its lowest close in more than three months. The Shenzhen Composite Index of China's second, smaller exchange tumbled 7.2 percent to 904.14.

Investors began selling heavily last week on concerns that banks will cut back on the lending that had helped push shares up more than 80 percent by early August.

Bank lending in August declined further following July's sharp fall from the previous month, state media reports say.

Further discouraging buying sentiment, last week the government said it will try to curb overcapacity and excessive investment in industries including steel and cement a possible side effect of its massive stimulus plan.

TOKYO Japan's factory output rose for the fifth straight month in July and is expected to keep climbing one of the few encouraging signs for a newly elected government charged with bolstering the world's second largest economy.

Industrial production climbed 1.9 percent from the previous month and "continues to show an upward movement," the Ministry of Economy, Trade and Industry said, a day after the opposition Democrats swept to power in a landslide victory in parliamentary elections, unseating the long-governing Liberal Democratic Party.

Markets fell, however, as a big drop in Chinese shares hit Asian markets. Hong Kong's Hang Seng lost 1.9 percent, and Tokyo's Nikkei 225 stock average shed 0.4 percent. Korea's Kospi was down 1.1 percent and India's Sensex dropped 1.7 percent. Australian shares were down 0.2 percent.

BRUSSELS Euro zone prices fell more slowly in August than they did in July, another sign that the worst of the economic downturn may be over.

Inflation in the 16 countries that use the euro prices ran negative at minus 0.2 percent in August from the same month a year ago, the European Union statistics agency Eurostat said. That was far less than the 0.7 percent price drop in July.

The July price figure was revised from the minus 0.6 percent reported last month. It was the third straight month that prices have fallen, after a minus 0.1 percent reading from June.

LONDON European governments should band together to give the International Monetary Fund a $75 billion boost, Britain's treasury chief Alistair Darling said.

In an article for the Guardian newspaper, Darling says Britain is ready to provide up to an extra $11 billion to the fund. The comments came ahead of a meeting of the Group of 20 finance ministers this week in London.

A joint letter by the French and German finance ministers, obtained by The Associated Press, said each nation was "ready to increase" their contributions to $26.5 billion (18.5 billion euros) and $35.95 billion (25 billion euros) respectively.

In the letter, addressed to Swedish Finance Minister Anders Borg Sweden currently holds the EU's rotating presidency Christine Lagarde and Peer Steinbrueck also called on "our EU partners to join us" in an effort to increase the EU's overall contribution to the IMF.

MUMBAI, India India's economy picked up pace in the latest quarter as government spending helped to overcome the worst of the global downturn but drought threatens to stall the recovery.

Growth in gross domestic product accelerated to 6.1 percent from a year earlier in the April-June quarter from 5.8 percent in the previous quarter, the government's Central Statistical Organisation said.

The uptick signals that the worst effects of the global financial crisis may have passed for Asia's third-largest economy.

BERLIN European markets fell following a plunge in Chinese shares. Germany's DAX 30 blue-chip index and France's CAC-40 both fell 1.1 percent. The London Stock Exchange was closed for a public holiday.

TORONTO The Canadian economy contracted at a 3.4 percent annual pace in the second quarter, an improvement from the first three months of the year, the government said.

Statistics Canada said the economy grew in June, the first monthly increase in almost a year. Canada's central bank and many analysts think the economy is starting to grow again in the current quarter.

The 3.4 percent drop in gross domestic product for the April-to-June period follows a sharp drop in the first three months of this year. The economy plunged at an annual rate of 5.4 percent in the first quarter, the largest quarterly decrease since 1991.

CAIRO Inflation in Saudi Arabia is expected to continue its slide after falling by more than half from its record high of 11 percent in July 2008, the head of the central bank in the Arab world's largest economy said.

Saudi Arabia's annual inflation rate fell to 4.2 percent in July, down from a peak 11.1 percent in the same month last year.

The drop in the inflation rate reflects the overall decline in housing and commodity costs, which eased sharply last year as the global economic crisis took its toll on the OPEC powerhouse.

WELLINGTON, New Zealand New Zealand's central bank governor said the economy has reached a turning point toward a recovery that's likely to be fragile and still has "an awful long way to go."