World markets fall 1.5% on Wednesday -weak U.S. consumer report

by Karl Gotthardt - albertacowpoke | October 28, 2009 at 03:26 am

373 views | 46 Recommendations | 12 comments

As evidence mounts, that the U.S. consumers will not return to their spendthrift ways, Asian markets overnight fell by 1.5%.

The U.S. Dollar lost ground against the Japanese Yen and Oil dropped below $80. The U.S. consumer is struggling, the Unemployment rate is edging close to double digits and in some states has already moved past 10%.

This does not instill confidence in the consumer. PIM of Spain has written several excellent articles on the state of the present economy. His predictions seem to be confirmed by these recent events of ups an downs of the markets.

Just last week there was overjoy that DOW had reached the 10,000 mark. Will there be continuing slippery slope of markets? It seems even Administration officials continue to contradict each other on the state of the economy.

Trading on Wall Street should prove to be interesting today.

Global stock markets dropped Wednesday as more signs American consumers were struggling undermined hopes for a stronger turnaround in the world's largest economy.

Major Asian markets fell by about 1.5 per cent or more, with European shares shedding about one per cent in early trade. Oil prices dropped below $79 a barrel, while the dollar weakened against the yen.

The losses followed another choppy session on Wall Street, where an unexpected drop in consumer confidence gave investors few reasons to venture further into a market that's run massively higher in the last eight months.

The news was the latest evidence that U.S. shoppers, their budgets tightened by the economic crisis and rising unemployment, aren't likely to return to their spendthrift ways anytime soon. It was all the more unsettling in Asia, coming ahead of the vital Christmas holiday season, when major export companies rely heavily on Americans to increase their spending on electronics, toys and other goods.

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Karl Gotthardt - albertacowpoke

at 11:05 on October 28th, 2009

Thanks for you comments Roy.

Iffy (not verified)

at 11:12 on October 28th, 2009

You miss a point: while it is true China's current economic model involves selling lots of crap to the western world, you can be damn sure they can turn their economy to other markets. It is a communist state: if they want 10 percent growth, then they get it. If they want everyone to have a swimming pool and a Hello Kitty Brand House, then everyone gets one. They create the demand because nobody has a say on the matter. We need to learn from that.

Karl Gotthardt - albertacowpoke

at 11:14 on October 28th, 2009

Good points Iffy, certainly something to consider.

nanute

at 11:24 on October 28th, 2009

And here's the kicker: they'll do it with our money.

Karl Gotthardt - albertacowpoke

at 11:41 on October 28th, 2009

rng, that would certainly be my take on Free Trade. I have had this discussion previously with others. When Canada and the United States were negotiating the Free Trade, which Bill Clinton eventually signed, there was a heated debate in Canada, were those against it were telling those for it that they were selling their souls to the U.S. Free Trade has opened many doors on either side of the U.S./Canada border.

Whenever protectionism becomes popular it is used as a tool by politicians to discredit it. Reality shows a different picture. Some manufacturing jobs just could not be sustained in North America and will never come back.

Hugh Askew

at 15:17 on October 28th, 2009

If, when, the economy - worst case, mind - crashes far enough, wages will fall to the point where we will again be competitive. Not a pretty thought, but plausible enough for me to toss it out there.

nanute

at 15:21 on October 28th, 2009

Let's just hope that if that happens a dollar an hour will buy a weeks worth of groceries.

Karl Gotthardt - albertacowpoke

at 17:08 on October 28th, 2009

Yes none of it can be ruled out, especially the Iran scenario. The Strait of Hormuz is a fragile passage for oil. There is a reason there are still U.S. troops in Iraq.

Somebody should have also noticed recently all the international trade agreements that have been concluded between Russia and China and China and Russia with India.

Do you think there is some positioning going on to influence world events?

Hugh Askew

at 11:06 on October 29th, 2009

Cowboy, China has made oil deals all over the globe in the last few years. Enough to ensure a supply of oil to China regardless of what happens in the Straits. They have been using American dollars, that may well be worthless, if the scenario plays out.

Very prescient in my humble opinion. Explains the Chinese stance on Iran. Why lobby for your rivals interests? Any further mess there will only entangle the US further, and cost us an incredible amount in money and prestige.

Besides, it lets China appear to be neutral and non-meddling.

Karl Gotthardt - albertacowpoke

at 11:18 on October 29th, 2009

You're right about deals all over the globe. They have even bought interests in the Alberta Oil Sands. All that requires is pipelines to the West Coast, which are being built as we speak. The oil will flow through an upgrader in Fort Saskatchewan, about 25 miles from here and then transported from there to the West Coast.

Jnkns

at 11:47 on October 29th, 2009

a weak dollar would never be good by any means, I mean it could lower the unemployment rate but inflation will be higher. overspending culture must be reduced so people stop getting loans of overprinted bucks.

http://www.tradeviewforex.com/cfdblog/post/2009/10/27/us-dollar-may-continue-advancing-against-euro-canadian-currency-dropped-tradeview-pro-trading-platform.aspx