November was an indicative month, as the trade deficit dropped out to its lowest level in five years as the global recession caused demand for oil to become scarce, sending markets and exchange traded funds (ETFs) lower.

A larger than expected decrease in the trade deficit narrowed it to $40.4 billion in November, a 28.7% decline from October’s deficit of $56.7 billion. Expectations are unanimous that the deficit will fall even lower this year as the demand for imports will continue to plummet, reports Martin Crutsinger for Associated Press.

Pushing the deficit lower is the shrinking demand for oil and the drop in Chinese imports. The lower oil prices is all the U.S. trade deficit needed to push to levels not seen since 2003, reports Jack Healy for The New York Times. The gap between the value of imports and exports narrowed to $40.4 billion in November, from $56.7 billion a month earlier, the Commerce Department reported on Tuesday.

Alcoa Inc. (AA) reported their first quarterly net loss in six years on what it called “historic” price declines, reports Rob Delaney for Bloomberg. As a result, the aluminum producer will be making output cuts in 2009 if demand continues to decline.

Sony’s shares are down again, as U.S. consumers are shaving down demand for imported goods. This is the Japanese company’s first yearly operating loss in 14 years, as demand for electronics has waned, reports Yuri Kageyama for Associated Press. These earnings reports are coming in just after Toyota (TM) forecast its first annual operating loss in 70 years.

Although Sony is a small slice of the ETF EWJ, it’s a sign of the economic sickness around the world and a harbinger of things to come.

  • iShares MSCI Japan Index (EWJ): down 5.3% year-to-date; up 13.% over three months

Japan ETF

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.