European releases overnight:
Q4 Forecast Actual
Euro-zone Employment (QoQ) +0.2%
Euro-zone Employment (YoY) +1.7% January
Swiss Adjusted Retail Sales (YoY) +2.7% +1.3% States releases overnight: Q4 Forecast Actual
U.S. Current Account Balance US$ -184.4bn -172.9bn February
U.S. Industrial Production (MoM) - 0.1% - 0.5%
U.S. Capacity Utilization 81.3% 80.9% March
U.S. Empire Manufacturing - 6.30 - 22.2
U.S. NAHB Housing Market Index 20.0 20.0
The quagmire that was once the economy seems more like imploding. The Empire Fed weakened to the lowest level since inception in 2001. It is reporting continued inflationary pressures in spite of the softer CPI number though new orders did tick higher.
The Fed continues to add liquidity, this time with $12bn in overnight repos while the stock market plunged an in particular the losses in Bear Stearns and also Lehmans which is now subject to fears. It’s now 7 months almost to the day when the subprime problems burst into the limelight. It caused mayhem and panic but almost seems like an orderly market compared to the extremity of the negative sentiment today. Bear Stearns has been rescued. The Fed provides record amounts of liquidity, has slashed interest rates and seems likely to slash another 75bp-100bp tonight. It may help smooth the market but it doesn’t seem to have any impact on the current hysteria. Indeed, another 100bp will give them precious little leeway for future action. Right now there are few who will bet good money that another bank will go down the pan like Bear Stearns. In fact they are already looking for the next. Yesterday’s share price losses in Lehmans may well be pure speculation, some even talk about Goldmans. They will be under pressure now to report solid earnings. However, fears will drive share prices and the risk is clear to see. Paulson remained steadfast on the policy towards rescuing banks in response to questions on the “moral hazard” of government bailouts. He pointed out that Bear Stearns’ shareholders face considerable losses. Nor was he fazed by the Dollar but would not speculate on intervention but repeated that a strong Dollar is in the U.S.’s best interest. The Europeans are less sanguine with a senior euro-zone central banking official stating “the U.S. should act upon their responsibility.” FX turnover is lower than August and that will actually exaggerate the depth of moves (in either direction) as traders play pass-the-parcel with large orders. However, the main trades are selling into rallies. No one wants to be left holding the Greenback when the music stops. What is more, until there is some other reason to buy the Dollar it will continue to be sold. Central bank intervention could smooth the decline but is unlikely to stop it in its tracks. If there is any other way the Dollar could reverse it would be on a European bank following Bear Stearns. However, right now if you consider the odds the risk is still fairly and squarely in the States. What should be added is that while the Dollar’s downside is by far and clear the greatest risk we should not forget the lower liquidity could make corrections higher just as rapid. The prospect is for increased volatility and amid the vertical drops a great deal of erratic sideways action.
More later once the daily analysis has been done…
There following releases are due from Asia due today:
The RBA publishes the Board Minutes Japan – February
Tokyo Department Store Sales (YoY) -1.6% (prior)
Nationwide Department Store Sales (YoY) -2.1% (prior) | 
