Economic Outlook: Tables turned

A dip in the escalating U.S. unemployment rate gave markets a one-day boost before fading into the haze of old news. On Monday, it was doldrums again.

Asian markets turned in a mixed day, and European markets faltered. U.S. markets, given a jump by Friday's surprise retreat in the unemployment rate from 9.5 percent to 9.4 percent, settled down to Earth again. Major U.S. indexes lost about 0.33 percent Monday.

A recovery, however, is lurking. In China, a huge stimulus plan has kept the country pointed toward growth of around 8 percent for the year, with industrial output gaining 10.8 percent in July compared to the same month a year ago. Exports fell 23 percent in July, a figure China has stared down with a huge increase in domestic lending and a jump in retail sales U.S. retailers could only dream about.

Retail rose 15.2 percent in China in the month, The New York Times reported.

But the critical numbers, University of Maryland economist Peter Morici said, are the trade balance figures, which he said continue to drain the U.S. economy at about the same pace the massive $787 billion Recovery Act props it up. When stimulus spending ends, he said, reality will return, leaving the inexorable slide in U.S. manufacturing jobs intact.

Goldman Sachs economists, meanwhile, predict China's gross domestic product will expand 11.9 percent in 2010. This year, it may jump 9.4 percent, even higher than the government's target of 8 percent, they said.

Back on the ranch, a federal judge in New York turned the tables on Bank of America Monday, refusing to accept a $33 million fine for deceiving investors when it purchased Merrill Lynch.

It only took Judge Jed Rakoff's signature to seal the $33 million conclusion to Bank of America's back door deal with Merrill Lynch in which the bank agreed to pay billions in bonuses to Merrill Lynch employees despite informing investors months earlier that it would not do so. But the judged turned ornery, calling the fine too small and ordering the Securities and Exchange Commission to name the executives who came up with the deal, The Washington Post reported Tuesday.

If the bank truly "misled the shareholders, as you assert about a multi-billion-dollar matter, isn't there something strangely askew in a fine of $33 million?" Rakoff asked in court Monday.

In Tuesday's markets, the Nikkei 225 in Japan rose 0.58 percent, while the Hang Seng index in Hong Kong rose 0.69 percent. The Singapore Straits Times jumped 1.88 percent, while the S&P/ASX in Australia rose 0.65 percent.

In midday trading in Europe, the FTSE 100 in Britain slid 0.28 percent, while the DAX 30 in Germany lost 0.19 percent. The CAC 40 in France turned slightly higher, up 0.14 percent. The broader DJStoxx 600 fell lower, off 0.28 percent.