The American economy continues to do a bit better than many analysts had expected, but markets weren’t interested as they focused on the fighting in Korea and the Irish bailout’s fallout (See story below).
The second estimate of third quarter growth shows the US economy expanding faster than previously estimated, with the strongest consumer spending for four years and solid exports.
But the news had no impact on markets which sold off in the US and around the world after the crazies in North Korea shelled a South Korean Island, killing two soldiers, wounding 16 others and damaging homes and properties.
South Korea fired back into North Korea.
Shares lost around 1%-2% in most markets (including China, where Shanghai fell nearly 2%).
US bond yields fell as nervy investors sought safety and gold jumped $US19 an ounce to $US1,377.
But copper fell, again and other commodities sold off.
And the Australian dollar again weakened, dropping to around 97.08 USc at one stage, to be down almost 5 USc in the past 10 days.
The euro fell to a two month low against the greenback as the Irish bailout rolled on and German Chancellor, Angela Merkel warned that the prospect of more bailouts in Europe was "exceptionally serious".
So the news of an improvement in US economic growth was completely overshadowed by other events.
That included, late in the session, news that the US Federal Reserve had cut its growth forecasts for the next two to three years and lifted its estimates for unemployment, and lowered them for inflation.
In other words, the Fed sees no real change in the US economy at least until 2013 from what is being experienced right now.
Eventually that is going to tell on corporate earnings, which will suffer a big fall.
But other figures showed stronger income growth and spending in the economy in the past nine months.
Earlier in the day the US Commerce Department said that gross domestic product, the broadest measure of the economy, grew at an annual rate of 2.5% in the three months ending in September.
That’s around 0.6% growth from the second quarter.
That’s a significant improvement over the 2% first estimate released last month and the 1.7% annual rate in the June quarter.
Consumer spending increased at a 2.8% pace, the best reading for that measure since the end of 2006, up from 2.6% initially reported.
Exports were also revised upward to 6.3%, from 5%.
But while that was encouraging, it can’t last while the housing sector remains depressed.
So the news that sales of existing houses fell in October after rising for a couple of months, will introduce a note of reality into the talk on the economy.
The National Association of Realtors reported that the number of homes sold fell 2.2% from September to an annual rate of 4.43 million.
The rate was down 25.9% from 12 months earlier.
The median price of all existing homes sold during the month was $US170,500, down 0.9% compared with 12 months earlier.
About a third of the market was in distressed properties, repossessed homes and short sales.
