even when the Euro declined to the current low levels.
This would be the third consecutive contraction in Germany and the overall sixteen economies, returning bank in history we can remember that EU 16 had faced the first contraction in the second quarter, which came to astonish markets especially after they have recorded a supreme incline in their outputs in the first three months of the year.
Then the second contractions were seen in the third quarter, falling 0.2% pushing the zone under the technical definition of a recession. All this endless turbulence in the Euro Zone was a result of a spillover from the US sub-prime mortgagees that altered into the worst Credit Crisis since the Great Depression.
Tightened Credit Conditions due to the continuous hesitations of the global banking and the financial system had eroded all the left cash in markets, companies were halted with severe losses that stalled their production levels and the demand across the world faded away as they lacked any trust in their economies.
The abrupt Credit Crisis intensified in September when enormous financial companies had to beg for support from governments across the globe just to keep them functioning, yet with all that support and interventions governments failed in preventing the private saving behaviors, which pushed market interest rates to elevated levels.
The start was with the German GDP, contracting sharply in the fourth quarter reaching to the lowest since 22 years, the quarterly seasonally adjusted output contracted 2.1% from prior shallow contraction of 0.5%, the yearly workday adjusted output shrunk 1.7% from the preceding rise of 0.8% and the non-seasonally adjusted growth fell to 1.6% from the previous rise of 1.4%.
Companies and the industrial sector in Germany, Europe's leading economy, were knock down badly from the continuous intensification of the Credit squeeze that had curbed the levels of investments badly besides to the exports that they used to depend on to bolster their economy.
This contraction came even after the European Central Bank slashed their interest rates three consecutive times, taking their benchmark rates down to 2.5% in December. The rate cuts, interventions and the financial sector bailout failed in cushioning the economy from dipping into a contraction for the third time, I believe that more contractions will be seen in the first half of the current year because the downturn and the turbulence is not over yet.
The sixteen-nation currency managed to incline today for the first day since in three days even after market saw a contraction in the growth levels, the EUR/USD pair is currently trading at 1.2916, recording a low of 1.2852 and a high of 1.2944 earlier today.
So now we are waiting for the zone's GDP reading with expectations that dipped in a deeper contraction in the preceding quarter especially after we saw worse than expectations German output reading. According to market projections, growth contracted 1.3% in the previous quarter, and retracting 1.1% on the year.
Moving to the North American continent...
Finally, today the Congress are going to vote in order to spread the blessing on the $789 billion stimulus which would be directly headed towards bolstering the world's leading economies growth snatching it away from a prolonged recession that would alter and reform into a mini depression.
Reviving spending, cutting taxes along with stopping the continuous surge in the unemployment rate would be the main aim of this fiscal stimulus, though till now a full agreement was not reached because the political issues are getting in the way before favoring the best outcomes for the US citizen.
The problem that this stimulus won't have an effect on the economy before six months which means that more turbulence and the jittery markets will consolidate investors concerns resulting to a surge in the private saving as they expect the worse and the failure of the plan following the previous approved plans.
However, the expectation of an approval managed to bolster the US markets last night, Dow Jones Industrial Average inched lower to -0.96% or 6.77 points reaching to 7932.76 levels, S&P 500 added 0.17% or 1.45 points reaching to 835.19 levels and NASDAQ composite added 0.73% or 11.21 points reaching to 1541.71 levels.
On our calendar, we are waiting for the University of Michigan confidence reading, according to the median estimate confidence slipped down to 60.2 levels in February from the previous 61.2 levels as the Credit woes continue to augment.
Therefore, my dear reader lets just see what would the euro area GDP turn out to be and if a deep contraction will be seen or not; from the United States we will be waiting for the vote, which might give the approval to the stimulus plan.