US recession: the wolf is at the door

The US housing slump is spreading: the manufacturing index is at a multi-year low, retailers are warning of weak holiday sales and unemployment has jumped to 5%. If the economy's not in recession yet, it soon will be.

In eight of the past ten years, the UK market's direction on the first trading day has foreshadowed the year's move, says David Budworth in The Sunday Times. Unfortunately, the FTSE 100 declined last Wednesday and lost 2% during the week; Europe was down more than 3% and the Dow Jones index's 4.2% slump marked its worst three-day start since the Great Depression.

Investors woke up to 2008 to find "the wolf at the door", as Alan Abelson puts it in Barron's. The US housing slump is spreading: the US ISM manufacturing index slid to a four-and-a-half-year low consistent with a recession in the factory sector. Retailers have been warning of weak holiday sales.

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