http://english.pravda.ru/business/finance/28-02-2007/87808-usa_economic_recession-0
28.02.2007
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.
Great economic recession is in store for USA
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
[Non-text portions of this message have been removed]
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