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Slide May Not Presage Severe Recession


It's MORNING EDITION from NPR News. I'm Steve Inskeep.


And I'm Renee Montagne.

Stock markets in Europe are down again today. Some are down sharply. The main indexes of Germany and France are down more than 4 percent, and the London market main index is down more than 3 percent. All this after a relatively good day in the markets in most Asian countries.

NPR's Adam Davidson has been tracking those markets around the world and joins us now to talk about it.

Good morning.

ADAM DAVIDSON: Good morning.

MONTAGNE: And I'm saying good morning to you. But, of course, and, of course, U.S. markets have just opened now for about 40 minutes, though much of the world has been open for a long time. What do you see happening here in the U.S.?

DAVIDSON: Well, it started off a reasonably dramatic fall in the U.S. markets. They have been creeping back up. They're all down. The Dow, the NASDAQ, the S&P 500, all down in the 1, 1.5 percent range, which is, you know, not great for investors but not horrible. They were down more dramatically. It's nothing like the big sell-off that we saw in Europe. But, of course, it's the beginning of what promises to be a volatile day. So we'll have to monitor it and see where it goes.

MONTAGNE: Well, the last couple of days, of course, Monday and Tuesday, it seemed like the whole world was moving down certainly in the same direction. Today, mixed story, though, as you just mentioned, Asia's up. Europe and the U.S. down. What do you make of that mix?

DAVIDSON: It is a confusing mix. And I have to say for people who follow the markets - investors and analysts and business reporters like myself - it is much easier to understand what's going on when everyone, everywhere is doing roughly the same thing for roughly the same reasons. And this morning, we saw Asia really have a dramatic move up. Hong Kong just skyrocketed up, gaining 10 percent in a day, more than 10 percent - that's big. Nikkei in Tokyo doing pretty well, not quite as dramatically, but pretty well. And then Europe, down, down, down.

What seems to be the narrative that you can put on this is that in Asia, they were finally getting an opportunity to respond to the surprised Fed rate cut yesterday. Europe was still open when the Fed made that announcement. The U.S. markets had not yet opened so they had a chance to deal with that yesterday. Asia had their first opportunity today.

Now, when Europe woke up and when Europe started getting ready to invest, and the European Central Bank made an announcement that really bothered people. They said that we are not taking the view of the Fed. What the Fed did, as you recall, yesterday is they said, we are not going to worry about inflation. We are worried about a slowdown in the economy. We're worrying about the health of the economy, and we're going to act aggressively to get this economy moving quickly.

Europe said, uh-uh, we don't agree.

MONTAGNE: We're worried about inflation.

(Soundbite of laughter)

DAVIDSON: We are worried about inflation.


DAVIDSON: The London - the British central bank made the same argument, and European investors did not like hearing that.

MONTAGNE: Well, you wonder, though, then if Asia is just reacting a little late that it's going to follow the lead then of either Europe or the U.S. and sort of start moving down again.

DAVIDSON: Yeah, when we wake up tomorrow. I found these last few days very interesting that we live in this globalized, interconnected, Internet economy, but it still really matters. Time zones matter. Daylight matters. And all of these markets, it takes about 24 hours for them all to catch up to the same piece of information.

MONTAGNE: Adam, looking a bit at longer term, what can we expect over the next days but weeks possibly, and how will we know if, during that period, there is a recession or a recession on its way?

DAVIDSON: And I think that's the thing for the vast majority of people to do. Look long term, you shouldn't care too much about daily fluctuations in the market.

There is going to be some key economic data coming out in the next few days. Tomorrow, we're going to see new home sales. Next week, we're going to see existing home sales and numbers about what people are making for their wages and how people are spending their money. These are all December numbers that are finally going to come out.

These are really big. I mean, these are the things that most people don't pay too much attention to. But this week, next week, it might be time to pay attention because they're going to be really big indicators on whether or not the U.S. is in a recession or is going into a recession.

You know, there are places. Michigan, as we heard a lot during the primaries there and the other states where there already is clearly a recession. There are sectors like housing where there clearly is a recession. But for the broad base of Americans, the broad base of jobs and industries, we just don't know yet, and we're going to know more in the next week or so about whether we are heading to a broad, tough recession.

MONTAGNE: And just very briefly, any signs of hope, a place in the world that seems to be picking up?

DAVIDSON: I mean, Asia, this morning, it was nice to see. But as you mentioned, it's an equal bet that tomorrow we're going to see Asia go down in response to this European news.

So right now, it's looking like the whole world is waiting for this recession, and there's not a lot of bright spots for hope right now.

MONTAGNE: NPR's Adam Davidson speaking from New York. Thanks very much.

DAVIDSON: Thank you. Transcript provided by NPR, Copyright NPR.

NPR transcripts are created on a rush deadline by an NPR contractor. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.

Renee Montagne, one of the best-known names in public radio, is a special correspondent and host for NPR News.
Adam Davidson is a contributor to Planet Money, a co-production of NPR and This American Life. He also writes the weekly "It's the Economy" column for the New York Times Magazine.