DAVOS-KLOSTERS/SWITZERLAND, 30JAN09 - Angela Merkel, Federal Chancellor of Germany speaks to the participants at the session 'Special Address by' at the Annual Meeting 2009 of the World Economic Forum in Davos, Switzerland, January 30, 2009. Copyright by World Economic Forum swiss-image.ch/Photo by Sebastian Derungs

The US economy shrank at a 3.8% annualised rate in the fourth quarter but the fall would have been worse except that a build-up of inventories, which is counted as growth.

Excluding the inventory buildup, the economy contracted at a 5.1% rate - -  the weakest in 28 years.

Even with inventories, the growth rate is the worst since 1982.

Finfacts Report: US GDP fell at annual rate of 3.8% in the fourth quarter of 2008 - - The growth rate is the worst since 1982

The Dow Jones Industrial Average dipped 104 points to 8045; the S&P 500 fell 1.37% and the Nasdaq dropped 1.41%.

Bloomberg says the Wall Street bonus, considered a sacred ritual, may become the industry’s biggest casualty as governments worldwide bail out financial institutions.

UBS AG was told to reduce bonuses after the Swiss government gave the country’s biggest bank a $59.2 billion lifeline. Bank of America Corp. is under pressure to scale back payouts after New York Attorney General Andrew Cuomo subpoenaed executives earlier this week for information on compensation and President Barack Obama said just yesterday that bonuses handed out by banks represent “the height of irresponsibility.”

The current system of “asymmetric compensation,” in which people are rewarded when they do well and aren’t required to return the rewards when they lose money, is detrimental to society and needs to change, said Nassim Taleb, a professor at New York University and author of “The Black Swan: The Impact of the Highly Improbable,” in an interview

Live US Indices

In Europe Friday, the Dow Jones Stoxx 600 is up 0.12%.

The UK, French and German markets are down and 13 of 18 Western European markets, are in the red.

In Dublin, the ISEQ is down 1.40%.

AIB is down 14%; BoI is off 9% and IL&P 3%.

Ryanair is down 6% and Aer Lingus has slid 7%.

Bloomberg says today that the cost to hedge against losses on Irish government bonds is now the highest in the euro region as Moody’s Investors Service changed its outlook on the top-rated debt to negative.

Credit-default swaps on Ireland rose 2 basis points to 262.5, according to CMA Datavision. Investors perceive that the second riskiest nation is Greece, with contracts on its government debt costing 255 basis points, CMA prices show.

“The current economic crisis is likely to significantly affect Ireland’s economic strength and government financial strength for the years to come,” Moody’s analysts Dietmar Hornung and Kristin Lindow wrote in a report today.