Morning Economic News - December 10, 2008

The South Korean central bank dropped rates 1% Wednesday as the Leading Index for Korea slid 2.7% in a single month. This move adds further momentum to the movement of central banks to follow the Federal Reserve's lead in dropping rates to combat a recession that has gone global. Markets seem to be responding positively with oil prices rebounding despite a strong US inventory increase and continued demand weakness, stock prices increasing in the US and holding fairly steady in Asia overnight and US stock market futures down less than a quarter-percent early Thursday. The dollar is down against the yen, Canadian dollar, euro and pound, indicating some at least temporary respite from the "flight to quality" run to the dollar. On the other hand, there is one big negative sign for the economy that continues - US short term T-bill rates are at essentially zero (or even below zero adjusted for inflation), signaling that investors are nervous enough that they would rather hold "safe" Treasuries at no interest than risk the same money on stocks or even corporate debt.

Yesterday's Economic Reports

Federal Budget (US) - November 2008

• Year-to-date: $401,574,000,000 deficit


• Prior Year-to-date: $155,076,000,000 deficit

Weekly Mortgage Applications Survey - December 10, 2008

• Market Composite Index: 796.8


• Change: Down 7.1%


• Purchase Index: 298.1


• Change: Down 17.4%

Wholesale Trade - October 2008

• Wholesale Sales: $377.4 billion


• Monthly Change: Down 4.1%


• Year-to-year Change: Up 2.7%

Oil rebounds despite inventory build signaling possible market bottoms

...oil markets shrugged off the news and rose Wednesday and in early
overnight trading Thursday. Though this is the same pattern we were
seeing this time last year at the height of the oil bubble, in this
case the news is a bit more positive than just a return of the oil
bubble (which is not likely). For weeks nothing has put a floor under
oil because the thing driving oil prices downward has been anxiety
about the global economy; this oil rebound seems to be part of a
broader floor that includes stock prices, other commodity prices and
foreign currencies (against the dollar), at least for now.

Korean Leading Index plummets, central bank cuts rates 1%

South Korea’s economic indicators took a big tumble in October, the
Leading Index dropping 2.9% and the Coincident Index falling 0.7%, and
the South Korean central bank responded to the bad economic news with a
1% drop in key interest rate targets. With a 0.7% decline in September and a 2.3% drop in August, this puts the Leading Index down a cumulative 5.9% in just three months.

What I'm Reading

Gas Consumption Kept in Check

U.S. gas consumption ticked up last week as prices fell,
but experts don't predict a sizable rebound in demand until the economy
improves.

Slowdown In China Gets Worse

Sudden declines in China's imports and exports show the
country's economic slowdown is entering a new and more serious phase,
exacerbating the global slump while jolting Chinese companies and
workers.

Bank of Korea Reduces Interest Rate 1 Percentage Point to a Record Low 3% The Bank of Korea cut its benchmark
interest rate to a record low of 3 percent in an effort to
prevent the global economic crisis from pushing the nation into
its first recession since 1998.

China's Inflation Cools to Weakest in 22 Months as Economic Growth Slows China’s inflation cooled to the
weakest pace in almost two years, giving the central bank room
for more interest-rate cuts.

Australia's Jobless Rate Rises to a One-Year High as Economic Growth Slows Australia’s jobless rate climbed to
the highest in a year as employers cut part-time workers in
November, adding to signs the economy may follow the U.S., Japan
and Europe into a recession.

Taiwan Central Bank May Cut Interest Rates as Global Recession Hurts Trade South Korea and Taiwan will probably
cut interest rates today to shore up economies buffeted by
declining demand for exports amid recessions in the U.S., Japan
and Europe and weakening growth in China.

Worst Spending Slump Since 1942 Paces `Scary' U.S. Recession, Survey Says The biggest slump in U.S. consumer
spending since 1942 will extend the recession and push the
jobless rate to the highest level in a quarter century, according
to economists surveyed by Bloomberg News.

US Nov retail sales post big drop -SpendingPulse

NEW YORK, Dec 11 (Reuters) - U.S. retail sales excluding
autos posted their biggest monthly drop in five years November,
as consumers, spooked by a deepening recession, pared spending
for a third straight month, a private report released on
Thursday showed.