Releases from Europe:
November Forecast Actual
Swiss Adjusted Retail Sales (YoY) +4.0% +4.0%
Not to be outdone by Alan Greenspan George Soros has waded into the picture saying the current crisis is more serious than any other financial crisis since 1945. Having said that his view was that a U.S. recession was a “threat” but gave no probability rating. He also stated his surprise at the low level of understanding that it would be a threat to Europe too.
Indeed, we have heard two EC officials today commenting that the recession belongs to the States and will not seriously impact on Europe. The French Finance Minister Christine Lagarde claims that 60% of French business is done within the Euro-zone and thus the 8% that is done with the States will make the impact limited. She didn’t discuss the secondary impact through other countries. On the threat of recession Lehman Brothers rates the current risk at “only” 40%. This is far less aggressive than forecasts from Goldman Sachs which is forecasting a recession during the course of the coming year. Lehman Brothers suggest it is still too early to say but it would only take one more shock to the system to trigger the event and may also cause a sustained meltdown in global equities.
The following economic releases are due today:
January
U.K. CBI Quarterly Industrial Trends
U.S. Richmond Fed Manufacturing Index
More losses in Asian stock markets were seen in the Asian session and all eyes will be on the European indexes to see how they react. However, the more crucial reaction will be that of the U.S. markets which avoided the slump with yesterday being closed for Martin Luther King Day.
Is the fiscal stimulation package not large enough and not soon enough? The U.S. administration has stubbornly retained a partially bullish outlook saying there has been no evidence that the rest of the economy remains strong. However, their actions do not support their words as they clearly see the dangers of a slump in consumer confidence – the only real area which brings GDP to cling onto the cliff edge. A single blow here would have dire consequences. The fiscal stimulation package will leave a lump in the throat of Fed and administration officials alike – the last bastion of hope in what is quickly becoming as big a quagmire as the U.S. occupation of Iraq.
The interesting point to note from yesterday is how currencies baulked following the equity markets. In the wake of the turmoil in August every slump seen in global stock markets was accompanied by a slump in the Dollar – until yesterday.
Now, whether this was because the U.S. was on vacation is unclear. However, it is one to watch although I can’t see this really pushing outside of the broad 1.4309-1.4921 range for 2-4 weeks at least. There are technical signals which suggest it could lead to a bullish Dollar.
Note important support and resistance areas:
USDJPY EURUSD USDCHF GBPUSD
Res: 107.64-91 1.4490-22 1.1190-25 1.9536-85
Res: 106.50-90 1.4415-50 1.1120-35 1.9460-65 Spt: 105.60-90 1.4309-36 1.1055-77 1.9309-32
Spt: 104.95-21 1.4250-60 1.0974-98 1.9244-63 | 
