Economic Outlook: A scarce commodity

European Central Bank President Jean-Claude Trichet says fundamentals and confidence are at the top of his priority list.

After completing talks in Washington at the International Monetary Fund, and with Group of 20 finance officials, Trichet told an audience in New York Monday:

I have … strongly stressed that the scarcest resource we have right now is confidence in the future. We are in uncharted waters, and there are still risks of a sudden emergence of unexpected financial turbulence.

Uncertain times, indeed.

U.S. automaker General Motors Corp. announced cuts of 23,000 positions this week and tossed Pontiac, a brand it has produced since 1926, onto the scrap heap. Chrysler LLC, while still orchestrating its restructuring plans, may declare bankruptcy Thursday, The Washington Post said.

Retail in Japan slipped in March, down 1.1 percent. With the U.S. manufacturing sector also slipping, Chinese companies, some with as few as 10 employees, are busy producing knock-offs, such as the Hi-Phone, that undercuts the popular iPhone, The New York Times said Tuesday.

A company can produce a $200 knock-off for as little as $40, the Times said.

The swine flu threat may also shake up world markets. With cases now reported in Europe, economists fear that a pandemic will jolt international trade and increase worker absenteeism.

Fundamentals, however, put Europe’s banking economy in a tighter spot than the United States, Trichet said.

For example, he said, at the end of 2007, private sector loans came to 145 percent of the if the gross domestic product in the euro area. In the United States, where consumer spending dominates the economy, the same figure was 63 percent.

It means that to be effective, ECB (European Central Bank) policy must focus first and foremost on the banking sector, he said.

Trichet said policymakers at the bank had agreed not to go public with advance hints on interest rate changes and steered clear of a prediction. However, he maintained his call for international cooperation. This calls for a “¦ solidly anchored response, he said.

Markets, meanwhile, ticked down Tuesday. Asian markets were solidly down, the Nikkei index in Japan falling 2.67 percent, the Hang Seng index in Hong Kong down 1.92 percent. In Australia, the S&P/ASX was down 0.62 percent. The Singapore Straits Times declined 0.56 percent.

European markets also declined across the board. In midday trading, the FTSE 100 in Britain dropped 2.06 percent. The DAX 30 in Germany fell 2.60 percent. The CAC 40 in France shed 75.12 points, falling 2.42 percent.