dipping heavily in November to -9.4%.
The Housing sector will continue to tumble; according to the FOMC statement which was released two days ago housing prices will continue to slide where we witnessed previously the huge depreciation in prices. Reports released from various officials clearly say that prices will continue to weaken as the recession deepens into the states' framework, leaving it as an incurable contagion.
The disappointing fall in New Home Sales yesterday had overshadowed the optimism that diffused in markets after Obama's economic team said that they are going to establish an institution falling under the name of the Bad Bank, where this bank will hold all the toxic assets from the US financial system in order to push them back on track.
Also weakening earnings from most of the economic sectors had pushed the US indices into the red zone yesterday, Dow Jones Industrial Average fell 2.70% or 226.44 points reaching to 8149.01 levels extending losses to 7.15% in January; S&P 500 fell 3.31% or 28.95 points closing at 845.14 levels taking the month's losses to 6.43% and finally NASDAQ Composite dipped heavily 3.24% or 50.50 points closing at 1507.84 levels ending this month with about 4.39% in losses.
Asian markets traced the US indices failure, where Nikkei Index fell 3.12% or 257.19 points closing at 7994.05 levels, the falling Japanese indices came due to the ongoing pessimism from the continuous eroding profits their companies are facing. Along with the surging Japanese yen against the Euro and the US dollar, as investors tend to dispose the higher yielding assets such as the euro due to the glooming outlook and weakening fundamentals.
Earlier today we have seen some Japanese fundamentals that continue to clear out the weakness in their economy; the industrial production fell to record lows with 9.6% overcoming the previous fall of 8.5% in November. The falling demand on the Japanese goods as they became expensive from the ongoing appreciation of the Yen against majors had resulted this unprecedented fall in the Japanese industrial production.
Also in another report, consumer prices eased to 0.4% in December for the fourth consecutive time from the previous 1.0%, but the consumer prices excluding food and energy held still at a flat reading. Japan like other majors economies in the world are facing a huge threat of deflation, where the prolonged Credit Crisis which materialized on the real economy had managed to push consumer prices down to critical levels.
Japan between all other rivals was the only economy that faced deflation back in history, where they struggled with a prolonged status of deflation, which had resulted in taking their interest rates down to ZERO!!! Japan now might be heading towards using quantitative easing methods just to snatch their economy from a prolonged deflation.
But the turbulence from economies is not over yet; our calendar is full with gloomy data for today...
The start was with the Royal GFK Consumer Confidence which fell in January reaching a record low at -37, the ongoing deterioration in the Royal land had resulted in snatching away all the left confidence, as now the United Kingdom is facing the worst recession since World War II, where according to market projections UK will face a 2.8% contraction in this current year joining other such as the United States and the Euro Zone.
Also we will be waiting for the Net Consumer Credit data, according to the median estimate the credit eased to 0.7% from the previous 0.8%, along with the Net lending Securities on Dwelling which have eased in December to 0.6% from the previous 0.7%.
From the neighboring sixteen economies we are waiting for this week major fundamentals, which is the Unemployment rate along with the January consumer prices estimate. Surging unemployment rates that's what markets are going to see, reaching to 7.9% from the previous 7.8% as some analysts expects a wider increase due to the stall in the zone manufacturing sector due to the ongoing lack of international and domestic demand.
Moreover, the falling demand along with the drastic fall in crude prices had resulted in dragging consumer prices down to 1.4% in January according the markets projections from the previous 1.6%. The falling inflationary rates will obligate the European Central Bank to consider more rate reductions just to stop the sixteen economies bleeding from the deepening recession that would alter into a serious contagion called Deflation...
But the major markets mover for today is the United States GDP; markets anticipate a 5.5% contraction in growth levels in the fourth quarter, especially after the Credit Crisis intensification which took place in September materialized into the real economy, leaving the world's leading economy into a deep contraction the most since 1982.
Recession, job termination and the prolonged Credit Crisis are all now pushing the United States on the verge of facing for the first time in history Deflation, due to that the feds chairmen Ben Bernanake said on various occasions that they stand ready to use unorthodox methods in order to prevent any augmentation in Deflation risks.
With all that the hopes are all now heading towards the new president Barack Obama and his economic team as they are still lobbying for their huge fiscal stimulus to bolster their economy that already passed the House and sent to the Senates for further deliberations and hopes it will not be held there long as the economy continues to sink deeper...