European releases overnight:
Q4 Forecast Actual
U.K. Total Business Investment (F) (QoQ) - 0.5% +1.8%
U.K. Total Business Investment (F) (QoQ) +1.7% +5.3% February
Italian Trade Balance Non-EU EUR -2.05bn -1.33bn March
Italian Retailer’s Confidence General 110.3
Italian Services Survey 0.0 (prior) 3.0
U.K. CBI Distributive Trades Report - 5.0 +1.0 April
German GfK Consumer Confidence Survey 4.40 4.60
The pattern of European numbers yesterday remained the same, displaying the return to modest strength with little evidence that the U.S. woes have impacted significantly on Europe.
However, the concern over liquidity in the credit markets remains with the ECB commenting that it “continues to closely monitor liquidity conditions and notes tensions in short-term rates as the end-of-quarter approaches, notwithstanding the ample liquidity conditions…the ECB stands ready to provide additional liquidity if needed.” This should still restrain the ECB from hiking rates but as the status quo remains their hawkish rhetoric will continue while inflation remains too high.
States releases overnight:
Q4 Forecast Actual
Annualized GDP (F) +0.6% +0.6%
Personal Consumption (F) +1.9% +2.3%
Core PCE (F) (QoQ) +2.7% +2.5% March
Initial Jobless Claims (22nd) 370K 366K
Continuing Claims (15th) 2900K 2845K
U.S. figures were better than expected for a change. Q4 GDP remained unchanged but the composition of the number revealed a slightly firmer consumption level. Most came from the services sector, partly the energy sector, but left the goods consumption still looking on the soft side.
Probably the underlying situation was amply summarized by the Fed’s Lockhart pragmatic assessment who commented, “The economy is in a slowdown that resembles past periods that were the leading edge of a recession,” though declined to confirm whether Q1 was already seeing the economy slip into recession by declaring there is not yet enough evidence. However, his concerns echo the market’s fears in saying “The contraction in housing and the dampening effects of financial turmoil on household and business spending could persist through the remainder of this year. The recovery in growth I had expected in the second half of this year may be delayed.”
We have seen the goalposts shifted frequently since the problems erupted in August, and this applies to European forecasts also, with officials more biased to optimistic forecasts which are repeatedly downgraded.
This pattern is likely to persist but the longer it continues the more impact will be seen spreading to the global economy. This doesn’t imply that Europe and Asia will also enter recessions but any systemic weakening of the global economy will undoubtedly hit the weakest – mostly the over leveraged businesses which have taken a cheap ride on the back of the globalization bubble. This may not cause any European bank to fail but again there will be a weakening aspect that will undermine credit availability and cause the cost of financing to edge higher still which will dampen business activity on a wider basis. For the moment this will keep the Dollar broadly under pressure. However, yesterday’s failure by the Dollar to move back to the 1.5901 level against the Euro is a potential warning signal that there may not be sufficient momentum to see direct follow-through. If this persists further today then the risk will turn for a correction at the very least and possibly an extension of the consolidation seen since the lows 2 weeks ago.
More later once the daily analysis has been done…
There following releases are due from Asia due today:
Japan – February
Unemployment Rate 3.8%
Job-to-Applicant Ratio 0.98
Overall Household Spending (YoY) +2.4%
Nationwide CPI (YoY) +0.9%
Nationwide CPI exc food & energy (YoY) - 0.1%
Large Retailer’s Sales (YoY) +0.1%
Retail Sales (MoM) - 2.4%
Retail Sales (YoY) +2.2% March
Tokyo CPI (YoY) +0.5%
Tokyo CPI exc food & energy (YoY) +0.0% | 
