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U.S. economy unexpectedly contracted in Q4 of 2012

U.S. economy Q4 2012U.S. economy contracted by 0.1% in the fourth quarter of last year, despite forecast of the most pessimistic analysts who estimated an average increase of 1.1%.

Evolution is even lower compared to the third quarter, when the GDP of U.S. increased by 3.1%, and shows that hundreds of billions of dollars that the Federal Reserve, the U.S. central bank, continues to pump into the economy, failed to bring back the economic recovery.

The news brought declines to the European stocks, while U.S. index futures indicate that U.S. markets were expected to drop at the opening of the trading session. This happened after a substantial rally in recent weeks, leading American stock exchanges close to historical highs in 2007.

More and more analysts warn, however, that the advance of U.S. stock exchanges is not supported by economic growth, but by the injection of new money by the Fed. Thus, any indication that the Fed will moderate capital inflows could have negative effects on the capital markets.

Fed ended a marathon monetary policy meeting which lasted two days and was expected to announce its conclusions. Markets expect a tense press conference with the head of the Fed and investors will weigh every word of it to try to guess which direction the stock prices will go in the next period.

“This is one chink in the armor of the recent better-than-expected economic indicators. This will make people start to get wary. If it turns out Sandy and the fiscal cliff were the reasons for (the contraction), people will shrug it off,” said Wayne Kaufman, chief market analyst at New York-based John Thomas Financial.

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