The market seems to be selling-off on the back of limited bad news imo, apart from the dollar that is.

If you can hold your nerve and apart from any short term requirements to offload poor performing stocks, I have a couple!!, my advice would be sit tight. This does not have the feel of the tech(mining!) bubble at all. Difference being there are a lot of good fundamentals, unlike in 2000 when there were a lot of over rated nothing companies.

With bad news from Soc Gen I see most UK banks are leading the way up 8 to 9, imagine if we had some good news. Very strange.

Yes, yes, yes, I hear all the informed opinion about rates, crises, commodity and property values.
I understand the drop in equity prices and the way the USA looks bankrupt.
I can even follow the rougue trader bit and understand why that might cos the odd problem, and why UK Plc is heading towards a recession.
But nobody has addressed the real problems that always go with a UK recession.
History teaches us that when the economy goes bad, hem lines fall and skirts get long and dowdy.
I can cope with the redundancy, the inflation, the repossessions and watching my investments tumble like a russian gymnast, but the skirt thing is the last straw.
Please tell me that skirts will buck the trend this time.

not many know that correlation, though i think it is true ...... can cope with a trim bum in tight white jeans in lieu however!

Don't worry Alan summers coming ,short skirts will be back in..

jimmyb, is that your home help? Doesn't look like your pad needs much cleaning. Or is she just testing the furniture? :o)

Yes,, i originally advertised for a cleaner for 4 hours per week ,but now she does 40 with overtime.

I'm thinking of advertising for a secretary.....sigh !

Yes jimmy, but will skirts be affected this time?
BTW. Lovely picture of Moneyplus ;-)

A little snippet from Merrill Lynch research on the USA .....

"The recession in housing has spilled over to the rest of the economy, in our view. We now expect an outright contraction in economic activity in the first three quarters of 2008. This downturn should be led by consumer spending... As we saw in prior post-bubble de-leveraging episodes, the healing process takes time as the bad debts get extinguished and balance sheets repaired.... Home prices are expected to decline by 15% in 2008 and by a further 10% in 2009, with more depreciation likely beyond the forecast period. The inventory situation has become intractable and home prices are still far above historical norms when benchmarked against other measures such as rent or GDP. Housing starts will probably slide another 30% from current levels, to 700k by the end of 2008 a historic low needed to clear inventories amid the worst housing financial crisis in decades... We anticipate job losses in the range of 2.5 million, close to what we saw in the last recession. This in turn is expected to push the unemployment rate up, to 5.75% by the end of 2008 and to 6% by early 2009. Rising unemployment, $6 trillion in lost housing wealth combined with slumping equity valuations, and the lack of participation from the baby boomers for the first time in three decades likely will result in the worst consumer recession since 1980..."


A couple more bearish articles worth a read imv :

http://www.telegraph.co.uk/money/main.jhtml;jsessionid=JV2TJ1YI2CHT3QFIQMGCFF4AVCBQUIV0?xml=/money/2008/01/24/bcnstig124.xml

http://www.reuters.com/article/ousiv/idUSL25899920080126

********************************************************

And finally, someone who agree's with me that China, post Olympics, is not going to support world growth, but will be a problem, just like the good old US of A. He correctly notes that, if Asia is going to be the saviour in US recession, why are Asian stocks getting trashed with the worries of a US recession, simple, cause if the US goes into recession, Asia will follow fast behind, and they know that, even if they will try to avoid saying it (I mean, they have to have something to "pump" the markets with hope, whilst they (US and EU hedge fund managers) try to sell off big lumps of their holdings where they can)...........


At the Edge of the Abyss
by Gary North

DIGG THIS

This week has been filled with surprises. It began with bad news for international stock markets. It got rolling with unprecedented news from the Federal Reserve System. It got wild with nutty news from a bureaucrat in New York. Then it settled down to wild swings on the American stock market.

All in all, this week was a sign that the economy is headed toward the falls. Keep close watch on the canoe 100 yards ahead of you. If, without warning, it disappears, start paddling for the shore. Either shore. Fast.

On Monday, Americans were home, celebrating the birth of Martin Luther King. Well, maybe not celebrating. But home.

The American stock markets were closed. That left foreign markets to set the pace. They fell. They looked like they were in free-fall. Then, the next day day two for them they fell again, only worse.

Fifteen minutes before the New York Stock Exchange opened, there was an announcement from the Federal Reserve System. The Federal Open Market Committee had met in secret the night before and had voted, 8 to 1, to lower the target rate for the Federal Funds rate by three quarters of a point: 75 basis points, as they call it in the trade.

First, this announcement came a week before the scheduled meeting of the FOMC. This was unprecedented. Second, the FOMC met secretly overnight. Third, the rate cut was the largest single cut in over two decades. Fourth, the announcement came 15 minutes before the market opened.

What does this tell us? This: eight of the nine members of the FOMC thought the stock market was about to collapse. This was a panic move by eight frightened men in the face of a potential panic sell-off by frightened mutual fund managers, on behalf of frightened investors who would start selling as soon as the market opened.

This is exactly what happened. Sell orders from the day before were executed. The Dow Jones Industrial Average fell like a stone by 450 points. This carried the Dow below its high in March, 2000, officially wiping out all profits for eight years, not counting the 21% loss due to price inflation, i.e., lower purchasing power.

Then the market turned. Oh, joy: the FOMC had intervened to save the stock market! Up, up, up it went, almost to the opening price. Then it fell 170 points. Then it rebounded almost to break-even. Then it fell. Then it rebounded. Then it fell. It wound up down by 128. Whew! Saved by the FED!

Overnight (for us), stocks rebounded in Asia (day three). There was one cause: confidence that the FOMC's action would save America from a recession. Asia's markets recovered most of what they had lost for two days.

This recovery was extremely important, but not for reasons offered. It revealed that Asian stock markets are completely dependent on the Asian investors' perception of America's economy. This means that if the U.S. stock market falls, Asia's stock markets will fall. The economies are interlinked. But America's economy is the tail that wags the dog.

SOROS' WARNING

George Soros doesn't think so. I hate to argue with the multi-billionaire currency futures guru, but what happened this week says he's wrong.

On Tuesday, he gave a speech in Davos, Switzerland at the annual Davos summit. He said that America is clearly headed for a recession. He also said that Asia isn't.

He added this: the U.S. dollar is now being abandoned by central banks. It will no longer be the world's exclusive reserve currency. Bloomberg reported:

"The current crisis is not only the bust that follows the housing boom, it's basically the end of a 60-year period of continuing credit expansion based on the dollar as the reserve currency," Soros said in a debate today at the World Economic Forum in Davos, Switzerland. "Now the rest of the world is increasingly unwilling to accumulate dollars."
This is true, but this has been going on for several years, as I have noted before. This quiet abandonment of the dollar, not America's price inflation (low) or monetary inflation (zero in recent years M-1), is why the dollar has been falling and gold has been rising.
A recession is almost certain in the United States, he said. But he is optimistic about the world's economy.

"I think it is almost inevitable that the turmoil in the financial markets will affect the real economy," said the founder of New York-based hedge-fund firm Soros Fund Management LLC, which has $17 billion in assets. China and India are benefiting from globalization to a degree that "I don't expect a global recession," he added.
While I don't control $17 billion in assets why, not even 10% of this I think he is wrong. I think what happened early this week indicated how wrong he is. The world's stock markets went into a tailspin on the threat of a U.S. recession. Then most of them recovered because of the supposed ability of the FED to avoid a recession here.

Why would the stock markets move in lock step if the underlying economies were not so tightly intertwined that a fall in demand from the United States will not spread?

Here is one possible response: "If China's economy is growing at 10%, why should a 1% or even 2% decline in the U.S. economy pull down China?" Here is my answer.

CHINA'S BOOM

China's central bank has already announced that it will take steps the control price inflation. A Reuters story on December 30 announced:

China's central bank will implement a tight monetary policy in 2008, using a range of tools to keep a check on liquidity, the central bank governor, Zhou Xiaochuan, reaffirmed.

The People's Bank of China has waged a war on excess liquidity and inflation in 2007, raising interest rates six times and increasing the proportion of deposits that banks must hold in reserve 10 times, to a record level. Still, annual consumer inflation is running at the quickest pace in over a decade, and many economists are concerned that it could spill over from food into the broader economy.

The imagery of faithful central bankers waging war on inflation is as inspiring as the image of Alan Greenspan waging war on investment bubbles. The economic boom in China has been created in large part by the central bank, which has inflated M-1 at rates in the range of 17% to 19% for years.

For China's central bankers to warn about price inflation is comparable to the warnings from the Federal Reserve's spokesmen regarding price inflation. In both cases, the central banks are the exclusive cause of the price inflation. From 1938 until now, there has been only one year 1955 where America's prices fell, and then by only 1%. That is because the FED has increased the money supply every year since 1933.

At some point, China's central bank will be successful in slowing price inflation. The economic boom requires ever-larger percentage increases of the money supply. By merely following the policies of the previous year, the central bank will produce a recession. If the central bank is serious about slowing inflation through interest rate increases, it will see its goal achieved. Price inflation will in fact slow. The cause of the slowdown will be a recession in China.

What could trigger this? A recession in the United States could. Falling demand for the goods produced by China's export sector will produce bankruptcies in China. They will order no more goods and services. These effects will ripple through the Chinese economy. In the absence of the recessionary efforts of central bank policy, these ripples could be contained by growth in the other sectors. But a reduction of Chinese economic growth is already in the pipeline. The central bank's policy of letting interest rates rise is sufficient to create a domestic recession.

When China goes into recession, assuming the U.S. is also in recession, the whole world will go into recession. This is why I think Soros is wrong. The crisis in the subprime market is spreading to the corporate bond market. The bond insurers are facing bankruptcy. This will lower the ratings of the bonds held by banks all over the world.

This leads me to Wednesday's stock market reversal.

THE 600-POINT RUMOR

The Dow opened Wednesday in panic sell-off mode. It opened at 11,950. It gapped down in one shot to 11,750. Then it fell to 11,700. Then it went back up almost to 11,850. Then it steadily retreated to 11,650. That was just before 1 p.m. Then it reversed. Up, up, up it went. It closed at 12,200. The move was in the range of 600 points, and was reported as such by the press.

What could cause such a reversal? Only after the market closed did the general public find out.

At about 1 p.m., there was a report issued by the office of the New York State Insurance Department. The head of the Department had called a meeting of New York bankers, which was beginning. London's Financial Times described what happened next.

Leading US banks are under pressure from New York state's insurance regulator to provide as much as $15bn to support struggling bond insurers, people familiar with the matter said on Wednesday night.

Eric Dinallo, New York insurance superintendent, held a two-hour meeting with bank executives on Wednesday and urged them to provide as much as $5bn in initial capital to support the insurers the largest of which are MBIA and Ambac and ultimately to commit up to $15bn.

Consider what this meeting was about. Companies that have issued insurance contracts to cover for losses in bond holdings are now threatened with bankruptcy because of the turmoil in the subprime credit markets and also the huge market called credit default swaps. These companies may not have enough money in reserve to cover the losses. Their stock market value had tumbled. They were facing bankruptcy. (In my view, they still are.)

Who are the parties who have paid premiums for this insurance? Banks, mainly. Hedge funds are also on the other side of the contracts. If these insurers go belly-up, the market value of the formerly insured bonds will fall. This will create losses for the banks and hedge funds potentially gigantic losses.

So, the head of the state insurance department called in bankers whose portfolios are at risk by the bankruptcy of the insurers and suggested that the pony up as much as $15 billion to cover the losses of the insurers.

Got that? The insured are supposed to insure the insurers against loss. Why? Because if the insurers go belly-up, the banks will experience a loss.

This sounds crazy. But it makes sense under this scenario: the collapse of the bond market threatens the banks by a lot more than $15 billion. If the banks called in are facing losses so huge that $15 billion looks like a bargain, can you visualize what the threat is internationally? After all, the commissioner did not call in banks from outside New York.

The International Herald Tribune, owned by the New York Times, reported on January 24 that the threat of default is creating widespread concern.

Regulators fear a possible chain of events in which the troubled bond insurers, MBIA and Ambac, might be unable to keep their promise to pay investors if borrowers default on their debt.

That could leave the buyers of the bonds including many banks and pension funds on the hook for untold billions of dollars in losses, shaking confidence in the financial system.

It was in this context that the discussion of a $15b bail-out took place.

The notion that the failure of even one big bond insurer might touch off a chain reaction of losses across the financial world has unnerved Wall Street and Washington. It was a factor in the Federal Reserve's decision on Tuesday to calm investors by reducing interest rates by three-quarters of a point, to 3.5 percent.

The bond-insurance industry has never before been threatened by a failure of major bond insurers. It has been a low-risk industry, the article reports. Not any more.

"Regulators are furiously trying to come up with a plan," said Rob Haines, an analyst at CreditSights, a research firm, who was not at the meeting. . . .

While $15 billion might seem like a large amount of money for banks to commit to bond guarantors at a time when many investors have lost faith in them, Haines said it would be smaller than the billions the banks might have to write down if the companies lost their top ratings or incurred major losses.

"It's a calculated kind of risk," he said.

A spokesman for Ambac did not return calls seeking comment. A spokeswoman for MBIA declined to comment.

What are we talking about in terms of potential losses?

MBIA has estimated that in the worst case, which it described as a one in 10,000 event, it expects to incur losses of $10 billion, a fraction of the $673 billion it has insured.

I don't know about you, but when I read "$673 billion," insured by a single company in the industry, I grow nervous. Sorry, but I do.

I also think: "What kind of people paid premiums to a company to insure $673 billion worth of bonds?"

Answer: the best and the brightest, the people whose decisions have laid the foundations of the present crisis, which, if it occurs, will re-shape the world's economic system. You know: people like Charles Prince, the former CEO of America's second largest bank, under whose administration, Citigroup has lost (so far) an admitted $18 billion.

My conclusion: The international capital markets are at the edge of the abyss.

The article in the Financial Times added this information.

People familiar with the matter said the specifics of a possible capital infusion had yet to be decided, but contributions would not necessarily be based on how much exposure each bank has to bond insurers.

Some participants in the meeting described the discussions as at an early stage.

Let me summarize. A bureaucrat in charge of regulating MBIA calls in New York bankers to discuss a bail-out totalling (initially) $15 billion. There are no specifics announced. This is only a preliminary discussion. Result: the Dow rises almost 600 points in the afternoon.

If you think stock mutual fund managers were ready to grasp at straws, you have the picture.

CONCLUSION

We appear to be in the early phase of a financial earthquake that will get into the history textbooks. The volatility of the American stock market indicates something severe, yet at present is being contained. Contained by what? By rumors and hope.

I do not suggest that you entrust your financial future to people who invest in terms of rumors and hope. These are the same people who advised clients that they should hold a balanced portfolio of American stocks back in early March of 2000. That portfolio is lower today by 21% due to price inflation, and if the portfolio was the S&P 500, lower by an additional 15% because of recent market declines.

The bad news is just getting rolling.

Stay tuned.

WASHINGTON (MarketWatch) - U.S. builders slashed prices by more than 10% in December in a failed bid to boost sales, which dropped about 5% to the lowest level in nearly 13 years, the Commerce Department reported Monday. Sales of new homes fell 4.7% to a seasonally adjusted annual rate of 604,000 in December, far below the 645,000 expected by economists surveyed by MarketWatch and the lowest sales pace since February 1995. The median sales price tumbled a record 10.9% to $219,200 compared with November and were down 10.4% compared with a year earlier. For all of 2007, home sales fell a record 26.4% to 774,000 compared with 1.05 million sold in 2006.

somewhat perversely, Dow has staggered upwards ...... of course, that is everyone banking on another minimum 0.5% cut by Fed ...... meanwhile, European central banks do bugger all.

while one might argue that Fed is taking something of an alarmist stance, Bernanke will argue rightly or wrongly, that the Fed is at least doing something positive to try to head off the worst effects of any recession.

meanwhile, the European banks stand back and assume that Europe will blithely absorb and float through any US troubles ..... that has to be head in the sand stuff!

after those figures i guess 0.5 is a done deal

did i not see in the Times yesterday that this could cause the loss of 2million plus jobs?

Rebates: Congress giveth, China taketh away?
Many Americans believe any rebates from tax stimulus will benefit Beijing more than Baltimore and Bakersfield.

and elliot wave forecast 10.5k

Couple of interesting write ups on China's inflation problems.

http://www.iht.com/articles/2008/02/05/business/yuan.php

http://www.thestar.com/comment/article/300835



And also one for the bears.......

http://kayakman.livejournal.com/79510.html

Chinese inflation still rampant.


http://www.999mixfm.com/news/13/666879/china+faces+pressure+to+raise+interest+rates+to+rein+in+inflation

China faces pressure to raise interest rates to rein in inflation

Fri, 2008-02-15 11:48.

By: THE ASSOCIATED PRESS SHANGHAI, China - China is under strong pressure to raise interest rates to rein in surging prices, a central bank adviser says, as Chinese news media said Thursday inflation likely rose above seven per cent in January.

The challenge is in countering inflation and keeping China's currency steady at a time when the United States is slashing interest rates to stimulate its own wobbling economy, Fan Gang, an adviser to the central bank, said in comments to the Communist party newspaper People's Daily. "We have to stick to a tight monetary policy to prevent rising prices from fuelling overall inflation," it quoted Fan saying. "Right now, our interest rates are relatively low while price levels are relatively high," he said. "Some short-term deposit rates are still negative in real terms. This means there is still pressure in the economy to raise interest rates."

China raised interest rates six times last year and increased the amount of reserves banks are required to hold on 10 occasions, seeking to cool investment and counter inflation. Authorities will continue to use those policy tools, Fan said without giving specifics.

A report in another Chinese newspaper, Wen Hui Bao, forecast the inflation benchmark for January surged above seven per cent, largely due to soaring food and fuel prices. Recent severe winter storms aggravated shortages, causing supply disruptions and damaging crops at a time when demand is traditionally high due to the Lunar New Year holidays while supplies tend to be tight.

Consumer prices were 6.5 per cent higher than a year earlier in December. January figures, due to be released next week, are expected to top that decade-high level, the Shanghai-based Wen Hui Bao said. Other reports have carried similar forecasts. Fan, the central bank adviser, said China would adapt its economic policy to changing domestic and international trends, such as the U.S. slowdown.

But he ruled out a one-step revaluation of the Chinese currency - subject of much speculation as the Chinese yuan's gains against the U.S. dollar have accelerated in recent weeks, as "impossible." "That is not a choice that would benefit stable economic development," Fan said, reiterating Beijing's contention major fluctuations in the yuan's value could damage the financial system. "In my own opinion, the renminbi (yuan) should continue to rise in a gradual, controlled manner suitable to developing the economy," Fan said. The yuan's value against the dollar, set at 7.1890 Thursday morning, has risen by just over 11 per cent since July 2005, when China revamped its foreign exchange system, revaluing the currency by about two per cent.

As I keep on about Chinese inflation and the rising costs of China and how China is no longer "cheap" - perhaps this might be interesting to some.


http://www.chinapost.com.tw/business/2008/02/23/144161/Rising-material.htm

Rising material and labor costs squeezing Chinese factories

Saturday, February 23, 2008
By Elaine Kurtenbach, AP


SHANGHAI -- The teddy bears selling for US$1.40 in Shanghai's IKEA store may be just about the cheapest in town, but they're not made in China -- they're stitched and stuffed in Indonesia.
The fluffy brown toys reflect a new challenge for China: Its huge economy, which has long offered some of the world's lowest manufacturing costs, is losing its claim on cheapness as factories get squeezed by rising prices for energy, materials and labor.

Those expenses, plus higher taxes and stricter enforcement of labor and environmental standards, are causing some manufacturers to leave for lower-cost markets such as Vietnam, Indonesia and India.

"It's true that we are facing difficulties regarding increased costs in China," said Linda Xu, public relations manager in China for Swedish retailer IKEA.

Though the competition for lower prices is not new, "we are constantly having to compete with other countries and suppliers," she said.

While costs in China are rising nationwide, the greatest pain is being felt in the south, where about 14,000 out of the 50,000 to 60,000 Hong Kong-run factories could close in the next few months, said Polly Ko of the Economic and Trade Office in Guangdong, which neighbors Hong Kong.

"Wages are rising, materials cost more. Overall, costs are definitely higher," says Duncan Du, general manager of Shenzhen Oriental e-Tecs Ltd., an electronics maker in the southern city of Shenzhen. To adapt, many multinational manufacturers -- including Intel Corp., iPod-maker Hon Hai Technology Group and Japanese companies like Canon Inc. and Sony Corp. are expanding operations in Vietnam.

Auto parts makers are decamping for the Middle East and Eastern Europe, textile makers to Bangladesh and India.

Thousands of smaller Hong Kong, Taiwan or Chinese-run factories in south China's traditional export hub of Guangdong are closing or moving out. As many as 300 of some 1,000 shoe factories in the Guangdong factory zone of Dongguan have closed down, according to a report by the China Light Industry Council. It said half of the shoe factories set up by Taiwan investors had already shifted production to Vietnam.

Costs have climbed so much that three-quarters of businesses surveyed by the American Chamber of Commerce in Shanghai believe China is losing its competitive edge.

The higher costs mean Western consumers are bound to face steeper prices for iPods, TVs, tank tops and many other imported products made by small Chinese subcontractors.

"Americans continue to want to buy at lower prices," said Kevin Burke, president and CEO of the American Apparel and Footwear Association. "They are used to going to the store during Christmas and getting something cheaper than a year ago."

That's no longer a sure thing.

Chinese inflation, meanwhile, has risen to its highest in more than 11 years, jumping 7.1 percent in January, as snowstorms worsened food shortages. The biggest price hikes have been for food, but longer-term pressures on prices for manufactured goods will persist, analysts say.

"China needs to reprice its exports and that has to be accepted by international buyers," says Andy Xie, an independent economist based in Shanghai.

But raising prices is tough for Chinese manufacturers when the quality of their products is suspect after a slew of scandals over tainted or potentially dangerous products.

At the same time, despite its huge pool of unskilled rural laborers, China's supply of experienced, skilled talent falls far short of demand. The gap has been pushing wages up by 10 percent to 15 percent a year.

A new labor law requiring stronger employment contracts is expected to raise costs even more.

Prices for plastics and other materials have climbed 30 percent or more, and electricity rates are surging, too. The government has also slashed export tax rebates -- originally given to promote exports -- on more than 2,800 products accounting for nearly 40 percent of all Chinese exports.
The steady appreciation of China's currency, the yuan, also contributes to the problem.

At IKEA's Shanghai store, a stroll down the aisles finds most products made in China, rather than Europe or the U.S. But a growing share of the goods come from less developed markets: stuffed toys from Indonesia, wooden train sets from Bulgaria, colorful rugs and throws from India, bed sheets from Ethiopia, baskets and wooden trays from Vietnam.

It also is sourcing from inland cities like Luoyang and Wuhan, outside the traditional export zones of Guangdong and the Yangtze River Delta, near Shanghai. In inland China, wages still lag far behind the richer eastern and southern coastal areas.

For many companies, especially those focused on the huge potential Chinese market, leaving the country would be a last resort, says Jonathan Woetzel, co-author of a recent book, "Operation China," that outlines strategies for competing in the country's fast-changing business environment.

"You'd have to start over, essentially," he said in an interview. "There's still quite a lot of opportunity to take cost out of the system. What we do see is supply chains extending inland, for example, going inland for final assembly."

Despite those strategies, prices for China-made products will likely continue to rise in the next few years, causing companies to increasingly look elsewhere, says UBS economist Jonathan Anderson.

"Over the medium-term, where are you going to invest if you're building a factory? Maybe not China anymore. Maybe Bangladesh, Vietnam, Indonesia. Maybe India."

the elliot wave forecast has failed

onday is going to be fun, perhaps three days of serious red before a pick up for Thu/Fri next week ?


http://money.cnn.com/2008/02/29/markets/markets_wrap/index.htm?postversion=2008022917


Brutal selloff on Wall Street

Dow tumbles 315 points, the second worst day of the year for stocks, after
AIG's big loss and UBS's outlook on financials.NEW YORK (CNNMoney.com) --


Stocks tumbled Friday, in the second worst day of 2008, after AIG's record loss added to worries about the financial sector and more weak economic news intensified fears about a recession.

Treasury prices rallied, sending yields higher, as investors sought safety in the comparatively safer haven of government debt, while the dollar held near a record low versus the euro. Oil prices dipped after topping all-time highs over $103 a barrel during the session. Gold prices jumped too.

The Dow Jones industrial average (INDU) lost nearly 316 points, or 2.5%. The broader Standard & Poor's 500 (SPX) index lost 2.7% and the Nasdaq composite (COMP) fell 2.6%. The Russell 2000 (RUT) small-cap index also got slammed, tumbling 2.7%.

Stocks tumbled for the month of February as well, extending the wretched start to 2008.

"It's a debacle today," said Dave Rovelli, managing director of U.S. equity trading at Canaccord Adams. "There's just no good news out there.".......................

http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article3465296.ece



.

http://www.iht.com/articles/ap/2008/03/03/america/Economy-Manufacturing.php

Survey shows manufacturing activity falling in February after slight expansion in January

The Associated PressPublished: March 3, 2008

NEW YORK: U.S. manufacturing activity declined in February to its weakest level in nearly five years, an industry group survey showed Monday, heralding more instability in the job market and frailty in the overall economy.

After reporting modest growth for January, the Institute for Supply Management said its February manufacturing index registered at 48.3 its weakest reading since April 2003, but above Wall Street's even poorer expectations.

A reading above 50 indicates expansion, and anything below that shows contraction. The February figure was a bit better than the median forecast of 48.1 of economists polled by Thomson Financial/IFR. But it was slightly worse than December's reading of 48.4.

Manufacturers have been struggling with the rising cost of raw materials and languid demand in the housing market. Industries reporting declining activity last month included furniture, textiles, machinery and chemical products; those reporting growth included apparel, leather, wood, plastics and rubber, and food and beverage.

It's too soon to determine whether economic reports prove that the nation's economy is headed for, or already in, a recession. Recession is normally defined by two straight quarters of declines in gross domestic output. But recession or not, Monday's manufacturing data supported the argument that the economy is indeed on the wane.

Today in Americas
Clinton vows to press onMcCain's evolving positions threaten image of straight talkerColombia links slain rebel leader to Venezuela"You can't paint a happy face on this data," said Wachovia Corp. economist Mark Vitner. "The economy may not be in recession, but it's not that far off."

The report's employment index fell to 46.0 from 47.1 in January, indicating accelerating contraction an inauspicious piece of news ahead of Friday's employment report for February from the Labor Department. On average, economists are forecasting a slight increase in payrolls, but some predict they will decline for a second straight month. January's net jobs loss was the first in almost four years.

And meanwhile, production stalled sharply the production index fell to 50.7 in February from 55.2 in January.

Other worrisome categories were new orders, which also showed an accelerated contraction, and prices, which continued to increase, albeit at a slower pace than in January.

The big reason manufacturing is not dropping off more severely is exports, said Norbert Ore, chairman of ISM's manufacturing business survey committee.

"It appears right now that manufacturing is weathering the storm better than other parts of the economy, particularly the financial sector," Ore said. The ISM's survey of February's service sector will be released Wednesday the group's most recent report showed the service economy contracting sharply in January.

Ore said eight of the 18 industries that the ISM manufacturing survey follows are closely tied to the export markets. Exports are holding up well due to the weak dollar, which makes U.S. goods attractive to foreign buyers.

The ISM's manufacturing index was released at the same time the Commerce Department reported that construction spending fell by 1.7 percent in January, its widest drop in 14 years. The two reports bolsters the argument for the Federal Reserve, which has already lowered key interest rates by more than 2 percent since last summer, to reduce rates again. Rate cuts tend to spur economic growth.