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Fed Cuts, Markets Close Red

Written By Brian Hicks

Posted January 22, 2008





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:

1.      Argentina

2.      Australia

3.      Austria

4.      Belgium

5.      Bulgaria

6.      Chile

7.      Colombia

8.      Cyprus

9.      the Czech Republic

10.  Denmark

11.  Estonia

12.  Finland

13.  France

14.   Greece

15.  Hong Kong

16.   Hungary

17.  Iceland

18.  India

19.  Indonesia

20.  Ireland

21.  Italy

22.  Latvia

23.   Lithuania

24.   Luxembourg

25.   Mexico

26.  Namibia,

27.  The Netherlands,

28.  Norway

29.  Peru

30.  The Philippines

31.  Poland

32.  Portugal

33.  Romania

34.  Saudi Arabia

35.  Singapore

36.  Slovenia

37.  Spain

38.  South Korea

39.  Sweden

40.  Switzerland

41.  Sri Lanka

42.  Thailand

43.  Turkey

44.  Venezuela

45.   Vietnam

Pretty big list huh?