As would be expected from a day when both Japan and the States were on public holidays the market was basically quiet although still saw some movement that was larger than normal for such a day. News out of Europe was contained to the U.K. PPI and industrial production numbers, neither bring particularly good news. Input prices were up by a lofty 6.4% YoY and way above forecasts of +4.4%. Output prices however were lower than forecast at +2.7% YoY against expectations of +2.9%. Clearly a squeeze on profit margins unless the input prices are factored into prices over the next month or two. However, very clearly after August’s fairly benign numbers there are warning signals for the BoE here and echoes of Greenspan’s warning of the halcyon days of growth and low inflation coming to an end. Industrial Production in August came in at +0.1% MoM and +0.7% YoY – lower than forecasts of +0.3% and +0.9% respectively while Manufacturing Production was just about in line with forecasts at +0.4% MoM and +0.6% YoY. Clearly the numbers were disappointing enough to provide an overhang on the Pound though in a holiday market there hasn’t been any strong follow-through – as yet. Just to confirm all the numbers we have been seeing from Germany, Factory Orders came in at +1.2% MoM and +4.0% YoY and below forecasts of +2.2% and +4.5% respectively. That Europe’s golden economy has been deteriorating quiet sharply over the last few months does not need repeating and the fact that we now have once stiff lipped German officials now bemoaning the strength of the Euro at 1.4280 after making confident calls of confidence at 1.40 is evidence that all is not well… However, a voice of reason has been found among the Euro-zone Finance Ministers. The Dutch Financial Minister has commented on what I thought was pretty damn obvious – that “The whole idea of monetary union was to make a strong Euro.” After being asked what message the Euro-zone would provide at next week’s G7 meeting he responded “A message of self-confidence as far as our economy is concerned, a message for others that their exchange rates should really reflect their economic fundamentals. That is not something you should manipulate in one or another direction.” Obviously no numbers came out of a States celebrating Columbus Day but the market still remains with the shadow of the large upward revisions in the non-payroll numbers from July and August. An additional 118K jobs is pretty sound. The only problem is that they were all linked to government jobs. Losses were still evident in construction, manufacturing, retails, financials and temp help. So what looks to be positive does have caveats applied and the market will be more interested in the production and sales side to show the U.S. economy is recovering again. The Dollar whipped around after the figures on Friday but gained ground over most of yesterday. Indeed, there is still room for more gains but we have probably seen the bulk of these gains which should still be considered as part of a correction. It should leave the week, which doesn’t have a great deal on show from the economics side, fairly slow moving and following this Dollar recovery the proximity of next week’s G7 meeting will restrain the market from pushing the Dollar too far in either direction. Today there is nothing of note to be released from the States with Germany providing a range of data for Europe. Given that this is hardly likely to be positive it does suggest further potential softness for the Euro. In the absence of strong market-moving data the Yen does look likely to soften up further after it broke above the 117.27 high seen on Friday. While it stalled at 117.59 the way does look open now for additional strength that should steadily make its way to the 119.82-120.25 area over the coming days. More later when the analysis is complete. The following economic releases are due today from Asia. Australian September NAB Business Conditions & Confidence Japanese September Eco Watchers Survey: Current 45.3
Japanese September Eco Watchers Survey: Outlook U.K. September NIESR GDP Estimate | 
