All things considered, it was a good day for the U.S. markets.
Sure the Dow lost 128 points, but that was a far cry from the 500 point or more loss that investors were staring down before the day’s open.
As it turns out, a big Fed rate cut “saved” the day after all-even though every index closed heavily in the red.
But the question now is whether or not any of it is enough to change the underlying conditions that are driving the U.S. economy towards the abyss in the first place.
And if not, what will other than time itself?
Meanwhile, a struggling U.S. economy is bleeding over into the rest the world as the decoupling story turns out to be nothing more than a myth.
That’s true even in China, where authorities have now admitted that a struggling U.S. economy is a more than just a warning to their own.
From Reuters entitled: China is not decoupling from U.S. economy: central banker
“China’s central bank on Sunday poured cold water on the idea that the country’s economy can decouple from the United States.
China’s exports will be badly hit if U.S. consumption weakens, Zhang Tao, deputy head of the international department of the People’s Bank of China, told a financial forum.
Figures due this week are expected to show that China’s gross domestic product grew more than 11 percent in the fourth quarter of 2007 from a year earlier, despite a deepening U.S. credit crunch.
But Zhang said he saw mounting risks to U.S. consumer demand. He noted that retail sales unexpectedly fell 0.4 percent in December, while property prices were falling and rising petrol prices were crimping disposable incomes.
“If U.S. consumption really comes down, that’s bad news for us,” Zhang said. “That will have a pretty severe impact on our exports.”
Wang Jian, head of the China Society of Macroeconomics, agreed that China’s growing trade with Europe was unlikely to insulate it from a drop in exports to the United States.
If U.S. demand weakened, Europe would export less to America and, in turn, would buy less from China, Wang said.
“Global demand is ultimately driven by the United States,” he said.”
Now that’s insightful indeed-especially with the prospect of a U.S. recession now practically a certainty.
By the way, here’s a list of the national indexes that have now dropped at least 20% from their recent highs, signaling bear market territory:
9. the Czech Republic
15. Hong Kong
27. The Netherlands,
30. The Philippines
34. Saudi Arabia
38. South Korea
41. Sri Lanka
Pretty big list huh?