Morning Economic News - January 28, 2009

Commentary and Overnight Trading

The drop in the Consumer Confidence Index Tuesday is particularly bad on a couple of levels. Most obviously the level was already at historic lows, so the drop makes a bad situation worse. Secondly, the fact that the Expectations Index fell even more than the Present Situation Index calls into question the Obama administration's prime weapon in reviving the economy and one where the administration seemed to have strong ammunition - Hope.

The Federal Reserve's monetary policy arm, the Federal Open Market Committee, will release a statement tomorrow, but as I noted here the Fed's commitment to a zero rate policy leaves little room for the statement to really say much. Or, as a Bloomberg article today puts it:

Fed's Shift to Zero Rates Leaves Experts Blind, Complicates Bernanke Job Investors will have a tougher time
assessing Federal Reserve policy when officials today replace
interest rates with emergency credit programs as their main
tool for steering the economy.

Still stocks are looking up heading into Wednesday with the Nikkei closing up more than half a percent and US stock market futures up almost 2% [3:22 AM Eastern]. Oil markets have recovered half a percent of Tuesday's 9% drop. With nothing to indicate a demand rebound, a Goldman Sachs report indicating that oil is not ready to rise and another inventory report due out Wednesday, the 9% drop seems more sensible than the rebound. The dollar is up against the yen, down against the euro, pound and Canadian dollar, likely on contrarian profit taking.

Tuesday's Economic Numbers

Consumer Confidence Index - January 2009

• Expectations Index: 43.0


• Monthly Change: Down 1.2

Case-Shiller Housing Price Index - November 2008

• Composite 20 Index: 154.59


• Monthly Change: Down 2.2%

What I'm Reading

Home Prices Slide, Angst Rises

U.S. home prices in the 20 areas tracked by
S&P/Case-Shiller fell 18.2% in November from a year earlier.
Consumer confidence hit a new low.

Unemployment Rises in Every State

State unemployment rates increased across the country in
December, new data show, underscoring how the recession has spared few
industries or regions.

Australian Consumer Prices Decline Most in 11 Years Amid Looming Recession Australian consumer prices declined
by the most in 11 years last quarter, increasing scope for the
central bank to cut interest rates as evidence mounts the
economy is heading for its first recession since 1991.

Dudley Brings Crisis Experience to Job as New York Federal Reserve Chief William Dudley, named president of
the Federal Reserve Bank of New York today, kept up his stamina
during last year’s all-night talks on the financial crisis by
napping on the carpet of his office at the bank.

Japan Finance Ministry Cuts View of Regional Economy as Recession Deepens Japan’s Finance Ministry lowered its
assessment of the regional economy for a fourth straight quarter
as companies cut production in the wake of a collapse in exports.

South Korean Consumer Confidence Rises From 10-Year Low on Stimulus, Rates South Korea’s consumer confidence
rose in January from a 10-year low on optimism interest-rate
cuts and the government’s 51 trillion won ($37 billion) stimulus
may help to revive the economy.