Morning Economic News - December 29, 2008

Commentary and Overnight Trading

Even trouble in the Middle East hasn't managed to move oil back above the $40 mark yet [2:30 AM Eastern]. And though a $1.31 increase has it well within striking distance of that mark, the increase can be accounted for almost entirely by a drop in the dollar - down against the yen, euro, pound and Canadian dollar. US stock market index futures are down about a half-percent, while Asian markets are up slightly.

Financial Roadmap: The Week Ahead December 29, 2008 to January 2, 2009

This week will give investors another breather of sorts with overflow
from last week's holidays starting off the week when the Fed reports on
money supply Monday. This statistic had become so boring, and so little
consulted, a few years ago that the Fed moved to a leaner version. The
theory at the time was that what was important to watch for monetary
policy was the federal funds rate. Now the Fed has slashed that rate
about as low as possible and is directly inflating the money supply as
a major policy tool. The numbers are getting very interesting and they
are pointing in a very familiar direction – another bubble is in the
works.

Economic News

Durable Goods Orders - November 2008

• New Orders: $186.9 billion


• New Orders Change: Down 1%


• Nondefense Capital Goods Change: Down 0.8%

Jobless Claims - December 24, 2008

• Initial Claims: 586,000


• Change from Last Week: Up 30,000

Personal Income and Outlays - November 2008

• Personal Income: Down $20.7 billion


• Monthly Change: Down 0.2%


• Real Disposable Personal Income: Up 1%

Weekly Mortgage Applications Survey - December 24, 2008

• Market Composite Index: 1245.4


• Change: Up 48%


• Purchase Index: 316.5


• Change: Up 10.6%

Interest rates at 37-year low

Freddie Mac and the Mortgage Bankers Association are both reporting
30-year rates near 5% and 15-year Fixed Rate Mortgage (FRM) rates below
5% for a second week. Buyers have responded aggressively to the lower
rates, with mortgage applications for home purchases up more than 10%
last week.

What I'm Reading

Paulson's Progress With China Evaporates as Recession Reopens Trade Rifts The global recession is re-exposing
fissures in U.S.-China relations that Treasury Secretary Henry
Paulson spent more than two years smoothing over.

U.S. Retailers Face Store Closings, Bankruptcies as Holiday Sales Slump U.S. retailers face a wave of store
closings, bankruptcies and takeovers starting next month as
holiday sales are shaping up to be the worst in 40 years.

London House Prices Led Declines Across U.K. in 2008 and May Fall Further London house prices fell more than
in any other U.K. region this year and probably will decline
further in 2009 as the economy sinks deeper into a recession,
Hometrack Ltd. said.

South Korea Consumer Confidence Falls to 10-Year Low as Unemployment Rises South Korea’s consumer confidence
fell to the lowest level since the Asian financial crisis a
decade ago on concern faltering economic growth will lead to
further job cuts and falling incomes.

Japan Economy May Shrink 6.5% This Quarter, Bank of America's Fujii Says Japan’s economy may shrink at an
annual 6.5 percent pace this quarter, Bank of America Corp. said
after reports last week showed industrial production and exports
posted the biggest declines on record.

Israel May Cut Key Interest Rate Half-Point to Record 2% as Growth Weakens The Bank of Israel will probably
lower its benchmark lending rate tomorrow to a record as
Governor Stanley Fischer seeks to shore up flagging economic
growth, a survey showed.

U.S. Manufacturing Probably Shrank Most Since 1980 as Global Demand Slid Manufacturing in the U.S. probably
shrank at the fastest pace since 1980 as the deepening global
recession forced customers in North America, Europe and Asia to
cut back, economists said before reports this week.

Democrats May Add Municipal-Bond Tax Break to Sweeten Obama Stimulus Plan Congressional Democrats are seeking
to expand funding for airport runways, housing projects and
sewage-treatment plants though a new tax break for municipal
bondholders.

Biggest Bond Investors Look for European Rally in 2009 as ECB Follows Fed The world’s biggest bond investors
are betting European Central Bank President Jean-Claude Trichet
will be forced to follow Federal Reserve Chairman Ben S.
Bernanke and step up the pace of interest-rate cuts.

Iceland's Fall: The Isle That Rattled the World

Iceland is an extreme casualty of an era in which it was
easy to borrow money. The tiny isle became so leveraged that its
collapse has rattled the world.