Business » Finance
Author`s name Alex Naumov

Great economic recession is in store for USA

Stock markets around the world plummeted yesterday in a wave of selling set off by a plunge in China that was reinforced by worries of weakening economies. The falling prices continued in early Asian trading today, but by midday the Chinese market seemed to be stabilizing.

While China was the first market to tumble, it was not clear what set off the selling. But once it began, it spread first to other Asian countries, then to Europe and the United States.

“It was sort of one of those days where somebody snaps their fingers, and the market’s hypnotic trance is over,” said Stuart Hoffman, chief economist of PNC Financial.

In China, where the stock market had been soaring, the government had warned banks about improper loans to finance stock speculation.

In America, the selling seemed to add to worries that a decline in the housing market, and problems in particular with loans to risky borrowers, could spill over. And a report yesterday indicating that orders for durable goods — items like washing machines and computers — were surprisingly weak in January revived doubts about the strength of the American economy, the New York Times reports.

After Wall Street saw its biggest losses on Tuesday since the Sept. 11, 2001, terrorist attacks, investors will be looking at fresh economic data on Wednesday to see if the plunge was justified.

Investors drove the Dow Jones industrials down more than 400 points Tuesday as worries grew that U.S. and Chinese economic growth could hit obstacles, and on the feeling that share prices had soared too high too quickly.

The U.S. government's report Wednesday on gross domestic product could either assuage or aggravate those fears _ the market is expecting that the Commerce Department will say that GDP grew 2.3 percent in the fourth quarter, less than the initial estimate of 3.5 percent.

Also Wednesday, investors expect new data from the Commerce Department to indicate new home sales declined last month, and the latest survey from the Chicago Fed on regional manufacturing will register a reading of 50.0 for February, up from 48.8 in January.

The Chicago Fed report could give the market clues to how well the Institute for Supply Management's index of manufacturing activity for February will perform. The market is currently predicting that index to come in Thursday at 50.0, up from 49.3 last month. A reading above 50 indicates expansion, and below 50 indicates contraction.

Wall Street could again take cues from overseas trading. A 9 percent drop in Chinese stocks triggered Tuesday's steep fall in the U.S., which followed a long period of stable and steadily rising stock markets that had not seen such a volatile day of trading in several years.

The Dow's decline accelerated throughout Tuesday, and stocks saw a huge dip in late afternoon trading as computer-driven sell programs kicked in, and also as a computer glitch caused a delay in the recording of a large number of trades.

The Dow fell 546.20, or 4.3 percent, to 12,086.06 before recovering some ground in the last hour of trading to close down 416.02, or 3.29 percent, at 12,216.24, leaving it in negative territory for the year. Because the worst of the plunge took place after 2:30 p.m., the New York Stock Exchange's trading limits, designed to halt such precipitous moves, were not activated.

It was the Dow's worst point decline since Sept. 17, 2001, the first trading day after the terror attacks, when the blue chips fell 684.81, or 7.13 percent. In percentage terms, it was the biggest decline since March 24, 2003, when the index fell 3.6 percent as investors started getting rattled as U.S. casualties mounted in the early days after the invasion of Iraq.

The Nasdaq composite index fell 96.66, or 3.86 percent, to 2,407.86. The Standard & Poor's 500 index fell 50.33, or 3.47 percent, to 1,399.04, the AP reports.

Former U.S. Federal Reserve Chairman Alan Greenspan warned Monday that the American economy might slip into recession by year‘s end.

"When you get this far away from a recession invariably forces build up for the next recession, and indeed we are beginning to see that sign," Greenspan said via satellite link to a business conference in Hong Kong. "For example in the U.S., profit margins ... have begun to stabilize, which is an early sign we are in the later stages of a cycle."

Greenspan said that while it would be "very precarious" to try to forecast that far into the future, he could not rule out the possibility of a recession late this year.

Greenspan also warned that the U.S. budget deficit, which for 2006 fell to $247.7 billion, the lowest in four years, remains a concern.

Greenspan also said he has seen no economic spillover effects from the slowdown in the U.S. housing market, localnewsleader.com reports.

Source: agencies

Prepared by Alexander Timoshik
Pravda.ru

Discuss this article on Pravda.ru English Forum

Russian Foreign Minister Sergei Lavrov said at a briefing in Beijing that the question about the shipment of S-300 anti-aircraft missile systems to Syria had not been resolved yet. However, Syrian Ambassador to Russia Riyad Haddad said that S-300 missile systems had been delivered to Syria last month

Israel can learn many lessons with the help of Russia's S-300 air defence systems in Syria

Representatives of the Israeli Defence Ministry responded to recent reports about the possible delivery of S-300 SAM systems from Russia to Syria. Israeli Defence Minister Avigdor Lieberman said that Israel would destroy those systems

Israel vows to destroy Russia's S-300 in Syria in case of danger
Comments
Russia and China warn against 'chaos and war' on Korean Peninsula
Large lake of boiling water found on Mars
Chernobyl could have killed 40,000 people
Silk Road To Germany: New Molotov-Ribbentrop-Mao Pact
Putin: Russia's young scientists build world's most powerful arms system in 7 years
Israel vows to destroy Russia's S-300 in Syria in case of danger
Russia wants to be prepared for most severe sanctions that Washington is working on
Russia wants to be prepared for most severe sanctions that Washington is working on
Russian Air Force shows how NATO ships can be destroyed. Video
Two women fall victims to Moscow plastic surgeons in two weeks
World War Three is near? The West wants to bypass Russia's veto at UN Security Council
Israel can learn many lessons with the help of Russia's S-300 air defence systems in Syria
Russian Air Force shows how NATO ships can be destroyed. Video
UK's Lehram fails to challenge the sale of Kuzbass mine
Ukraine loses nearly 4,000 military men killing fellow Ukrainians in Donbass
World War Three is near? The West wants to bypass Russia's veto at UN Security Council
Israel can learn many lessons with the help of Russia's S-300 air defence systems in Syria
Putin to sign new decree to spend ten trillion rubles on social needs
World War Three is near? The West wants to bypass Russia's veto at UN Security Council
Large lake of boiling water found on Mars
Israel can learn many lessons with the help of Russia's S-300 air defence systems in Syria