UBS said on Tuesday net profit shrank to 425 million Swiss francs from 1.0 billion francs a year ago, hit by a slump in trading and a 349 million franc loss on the glitch-ridden market debut of Facebook in May.

The Swiss bank said it would take appropriate action against the stock exchange Nasdaq for what it called “gross mishandling” of the Facebook offering.

UBS was cautious in its outlook, saying it would continue to explore avenues to improve efficiency, without detailing further measures. The bank, which employed 63,520 staff at the end of June, is currently cutting roughly 3,500 jobs.

As in the first quarter, UBS highlighted that the euro zone debt crisis, the economic outlook globally and the US “fiscal cliff” of potential steep tax increases and spending cuts were likely to hit its business.

“Failure to make progress on these key issues, accentuated by the reduction in market activity levels typically seen in the third quarter, would make further improvements in prevailing market conditions unlikely and would thus generate headwinds for revenue growth, net interest margins and net new money,” UBS said in a statement.

The earnings represent a sharp miss of analyst expectations, which averaged 1.141 billion francs in a Reuters poll.

UBS said it was nevertheless confident it would continue to gather net new assets, which totalled 9.5 billion francs in UBS’s flagship private banking arm for the wealthy.

UBS, the first bank to say last March it had been subpoenaed in a probe into how banks attempted to manipulate the London interbank offered rate, or Libor, added it was appropriately provisioned for all litigation.

President Barack Obama warned on Monday the U.S. economy would face continuing “headwinds” over the next few months, with Europe’s debt crisis still posing a challenge, but predicted the euro zone and its currency would remain intact.

“I don’t think ultimately that the Europeans will let the euro unravel but they are going to have to take some decisive steps,” Obama said at a campaign fundraiser in New York.

“I am spending an enormous amount of time trying to work with them, and (Treasury Secretary) Tim Geithner is trying to work with them,” he said. “The sooner they take some decisive action, the better off we’re going to be.”

Obama’s re-election bid is threatened by high U.S. unemployment and a stumbling economy, which has felt shockwaves from Europe’s debt troubles.

“Right now, the economy is still rough enough for enough people that this is going to be a close election,” Obama said. Polls show him in a dead heat with Republican challenger Mitt Romney ahead of the November 6 election.

U.S. economic growth slowed in the second quarter to a 1.5 percent annual rate, the weakest pace in a year, the Commerce Department said on Friday.

“We’re going to have some continued headwinds over the next several months,” Obama said. “Europe is still a challenge.”

The Reserve Bank of India (RBI) in its April-June quarter monetary policy on Tuesday left the key policy rate unchanged. However, it has cut the statuitory liquidity ratio (SLR) to 23% from 24% earlier.

Now, the repo rate or the rate at which banks borrow from RBI remained at 8% while the reverse repo rate at which, the banks lend to RBI at 7%.

SLR is the percentage of total deposits that lenders need to invest in the government bonds. The reduction is aimed at ensuring free flow of credit growth through enough liquidity in the system.

Cash Reserve Ratio or CRR is the portion of total deposits that banks are required to keep with the central bank also remained unchanged.

“Keeping in view the slowdown in growth, the Reserve Bank frontloaded the policy rate reduction in April with a cut of 50 basis points. Subsequent developments suggested that even as growth moderated, inflation remained sticky.

Keeping in view the heightening risks to inflation, the Reserve Bank decided to pause in the Mid-Quarter Review (MQR) of June 2012, even in the face of slowing growth,” D Subbarao, the governor of RBI said in the first quarter policy statement.

After a gap of nearly three years, RBI had last cut policy rates by 50 bps in annual monetary policy announced on April 17.

Amid deteriorating global financial conditions, the Reserve Bank today warned that both the equity markets as well the battered rupee are likely to be more under pressure going forward.

“On the domestic front, falling corporate earnings at a time when corporate positions are already leveraged, could keep equity markets under pressure,” the RBI said in a report on Macroeconomic and Monetary Developments, released on the eve of the monetary policy announcement.

It pointed out that global uncertainty continues to exert pressure on the rupee. “While currency pressures have currently abated, uncertainty remains ahead with the global risk aversion being high and the external sector weakening,” the central bank said.

The rupee is currently hovering at 55.60 to the dollar, which is around 10% fall from its April level, and around 25% since last August on the back of higher fiscal and current account deficits coupled with global uncertainty.

The RBI said stressed financial condition is likely to continue worldwide due to certain developments like the Libor scandal, money laundering cases by some leading global banks. Referring to the ongoing eurozone crisis, the report said the longevity of Greece in the European Union and Spanish banking problem pose risks to the financial stability of this region in particular and global financial markets in general.

It noted that subdued growth in advanced economies and concerns in the eurozone area have resulted in negative FII inflows to emerging economies. However, the Central bank remains optimistic about positive inflows from FIIs in the second quarter.

About overall liquidity situation in the economy, the RBI said liquidity situation has improved in the first quarter, as reflected in easing call rates and G-Sec yields. The yield on the benchmark 10-year treasury bill, which was 8.57% in April, has now fallen to around 8.12%.

The RBI, however, said deposit rates remain sticky, a reflection of higher costs of funds and inflation.