Figures confirm US heading towards recession…

Figures confirm US heading towards recession…

Preliminary GDP data released yesterday showed that the US economy contracted 0.3% in the third quarter, its sharpest decline in seven years, as businesses and consumers reigned in spending as fears of a recession took hold. The market consensus was for a decline of 0.5% so although the 0.3% contraction was the steepest decline since Q3 2001 it was not as bad as expected. Continuing job losses coupled with declining gains from stocks and other investments have put consumers under severe stress. The GDP report showed that disposable personal income dropped 8.7% in the third quarter after rising 11.9% in the second quarter boosted by the US government’s economic stimulus payments.

US Initial jobless claims for the week ending 25 October was left unchanged at 479k, above market expectations for a decrease to 475k. This compares to the revised 479k reading seen in the prior week (prev. 478k)

The Bank of Japan cut its interest rate by 20 basis points to 0.30%, less than the 25 basis point cut widely expected. The yen strengthened however on renewed investor concerns over riskier assets. Asian equity markets returned to negative territory after a week of gains reflecting the gloomy outlook that persists despite interest cuts.

This morning a report showed that German retail sales fell 3.1% in September after a rise of 3.3% in August, some turn around and underpins expectations that the ECB will cut interest rates next week. Gold slipped $3.75 per ounce to $731.75 and is on course for its biggest monthly decline since 1983, as oil also fell on recession fears forcing investors to cash in to stem losses.

Data due today includes Euro zone unemployment at 10:00 GMT, US personal income and spending at 12:30 GMT followed by the Chicago PMI for October at 13:45 GMT.

The contents of this report are for information purposes only. It is not intended as a recommendation to trade or a solicitation for funds. Currencies Direct cannot be held responsible for any loss or damages arising from any action taken following consideration of this information.

The contents of this report are for information purposes only. It is not intended as a recommendation to trade or a solicitation for funds. Currencies Direct cannot be held responsible for any loss or damages arising from any action taken following consideration of this information.