In the US, the warning finally meant something:
The Standard & Poor’s 500-stock index fell 2.7 percent yesterday, with much of the decline coming after Bear’s conference call started around 2 p.m. The Dow Jones industrial average lost 281.42 points, or 2.1 percent. And the dollar fell noticeably against the euro and the British pound.
While consumers continue to express confidence in the outlook for the economy, the government’s monthly employment report, released yesterday morning, added to worries about the spreading impact of the housing slump. The economy added only 92,000 jobs last month, down from 126,000 in June and the unemployment rate ticked up to 4.6 percent.
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“I have never seen it happen so quickly,” said Steve Walsh, a mortgage broker in Scottsdale, Ariz. “Banks always do these little cutbacks here and there. What they are doing now is a liquidity crunch. It’s a credit freeze.”
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Despite all the worries about credit markets, however, the economy continues to plow ahead and even yesterday’s jobs report was not weak enough to suggest that the Federal Reserve would cut its benchmark short-term interest rate when it meets next week.
But the risks to the economy do seem serious enough that investors now expect the Fed to cut its rate to 5 percent, from 5.25 percent by November, based on the price of a trading instrument that is tied to Fed policy. And the yield on the 10-year Treasury note fell to 4.68 percent from 4.77 percent Thursday evening.
[…]
Wall Street analysts say they are increasingly concerned that consumer spending will weaken as more people in housing and related sectors lose their jobs. They also worry that many homeowners will cut back as they find it harder to refinance or borrow against the value of their homes. [Markets Fall as Lender Woes Keep Mounting. NYT. August 4 2007]
Please do not look at the S&P 500. Instead, look at the issue in the housing sector.
That cold might spread to Malaysia. That huge government spending under the Ninth Malaysia Plan however could mitigate the effect of a slowing US economy, at a price of course.
Anyway, I am still holding on to that bet.
