US sees widespread signs of economic slowdown: Fed

The US Federal Reserve has said that American economic activities saw "widespread signs" of slowdown in recent months, in yet another indication that recovery in the world's largest economy is losing steam.

The dour statement from the apex bank comes at a time when the US is grappling with high unemployment levels and high public debt.

"(There has been) continued growth in national economic activity during the reporting period of mid-July through the end of August, but with widespread signs of a deceleration compared with preceding periods," according to the Beige Book released on Wednesday.

The book provides a snapshot of economic activities in the 12 districts in the US.

As many as seven districts including Minneapolis, San Francisco and Dallas witnessed modest pace of economic growth while economic activities were on decline in remaining areas.

"Reports on manufacturing activity pointed to further expansion, although pace of growth eased ... Home sales slowed further following an initial drop after the expiration of the home buyer tax credit at the end of June, prompting a slowdown in construction activity as well," Beige Book said.

After expanding at a healthy pace, the US economic growth turned sluggish to 1.6 percent in the 2010 second quarter. The economy is slowing down despite massive stimulus measures and the Federal Reserve maintaining key interest rates at near-zero levels.

Meanwhile, the unemployment rate in August rose to 9.6 percent and a staggering 54,000 jobs vanished during the same period.

Ohio bans outsourcing of govt IT projects

In a bid to ensure maximum employment opportunities for local people, the US state Ohio has banned outsourcing of government-funded IT projects to other countries including India.

"There are pervasive service delivery problems with offshore providers, including dissatisfaction with the quality of their services and with the fact that services are being provided offshore," Ohio Governor Ted Strickland said in an executive order passed last month.

Ohio administration’s decision is a double whammy for Indian IT companies, which is already hit by the Obama administration’s decision to increase the H-1B visa fee.

The US is the largest overseas market of India’s IT industry.

With unemployment rate is running as high as 9.6 percent in the US, the Obama administration, which is facing a litmus test in November’s Congressional elections, is looking for all possible actions to create jobs.

Ohio’s unemployment rate is at 10.6 percent, higher than the national average. Foreign companies fear that other US states might also follow Ohio and ban outsourcing of government-funded IT projects.

However, analysts said this would not affect Indian companies much as they largely rely on private firms for the bulk of their business.

TCS is the only Indian company to operate in Ohio. It employs 300 people and gets USD 19 million in tax credit for creating local jobs, an Indian business daily reported Wednesday.

Chances of double dip recession in US raised: Roubini

Economist Nouriel Roubini has come out with yet another chilling prediction. Roubini warns that the chances of a double dip recession in the US have increased as the second half of the year is expected to be even worse, reports ONE OF THE NATIONAL NEWS CHANNEL.

“Compared to six months ago when the probability of double dip was very low, right now, I expect it to be very high,” Roubini warned.

“Growth in Q2 has been revised downwards from 2.4% to 1.6%, given the construction numbers will be revised down to 1.2%,” he added.

He reasoned that based on the data the second half of the year is going to be worse than the first half 2 because all the tailwinds will become headwinds. He is concerned that if we finish Q2 with 1.2% then the second half will be worse.

“Once the growth rate is 1%, you are already in a growth recession, and then the risk is that the financial markets are going to have a downturn,” Roubini said.

US growth revised lower: What will Fed do now?

The second quarter growth in the United States has been revised lower to 1.6% from an initial estimate of 2.4%. Meanwhile, in the United Kingdom, growth has been revised upwards to 1.7%—the fastest since 2001. A stronger Europe than the US was unthinkable just a few months ago when we began the year with the specter of sovereign debt crisis in Europe hanging over our heads.

Are the Bad days coming back ???

The bad days will be back again in the Global markets. Euro has temporarily bounced back but the changes of Euro zone going bankrupt has not been phased out. No change in the US jobless claims indicates that there has been no change in the US markets.

Chicago Federal Reserve Bank President Charles Evan said the risks of a double-dip US recession have risen in the last six months. While he added he did not think that was the most likely scenario, he said high unemployment and a fractured housing sector would make the recovery a fragile one. Asian stocks fell on Wednesday, with Japan's Nikkei at a 16-month low, as investors sold riskier assets after a spate of worrying US economic data, while the yen slipped from a 15-year high on a report Tokyo was considering weakening its currency. But even if Japan's government acted alone to try and halt yen strength, dealers were skeptical it could reverse the growing unwillingness among investors to take risks that has underlined the yen's 10 per cent rise against the dollar so far this year.


The US housing market is taking a turn for the worse.

Tuesday's report from the National Association of Realtors about sales of previously occupied homes is expected to show sales plunged in July. Economists are predicting as much as a 26 percent drop from a month earlier to a seasonally adjusted annual rate of 3.95 million. That would be the worst month for sales in more than a decade.
Many say the market is hurting because buyers and sellers are in a standoff over home prices. Sellers have unrealistic expectations about their home values and are listing properties on the high end.

The Japanese Nikkei was down 1.66%, on reports of its export growth slowing for a fifth month in July and the appreciating yen against the dollar. It had touched a new 15 year
high and that caused some panic amongst the investment community as a siring yen is detrimental to the export oriented Japanese economy.

Buyers are afraid home prices will start falling after being flat nationally for about a year and even rising in some parts of the country. The housing market is also being hampered by a weakening economic recovery. Unemployment remains stuck at 9.5 percent and many prospective buyers worry they might not have a job to pay the mortgage. Prices are low, but that's largely because foreclosures are running about 10 times higher than before the housing bust. And while mortgage rates are at the lowest levels in decades, many people can't qualify because banks are being selective in the tough economy.

Major Indices closed down nearly1.7% each. Midcap and Smallcap Indices also tanked this week, loosing nearly 2% each. Name whatever group, it crashed this week. Except the Oil refining companies surged ahead and out perform the Major Indices. Bpcl & Ongc were up by 12% & 5% each. Banks and the Infra stocks had their bad week on the street. Hdfc Bank tanked nearly 3.4% and Icici bank & Kotak bank corrected 3.2% & 2.5% each.

Some of the midcap stocks outperformed the markets. Indswift Lab surged 35% while Surya Pharma was up 30%. Natco Pharm stock was up 16%. India witness above average rainfall in this season, this might be the reason for which major small cap and Midcap fertilizers could see some good rally.

Markets remained very volatile for the week. Nifty made its new 52 week high but ended up with sharp correction and triggered its lower trendline also. Nifty at the close of the week made an intraweek high and low of 5549 & 5391. There is not such bad news in the Indian markets except the growing inflation and the corruption. Indians are used to corruption and for govt has promised to get control over the inflation within 3 months, irrespective of actual prices coming down, the inflation index will surely come down

In the last week RSI had take support at the trendline but triggered the downtrend and continued to fall. MACD also showed negative divergence. Nifty will find support at 5375 -5350 levels.