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198859 Resource 128466 128654 128654 1204761919597 1204784541449 Controlled Asian Morning Update 6th March 2008

No breaks for the beleaguered Dollar…

European releases overnight:   January                                      Forecast       Actual Euro-zone Retail Sales       (MoM)    +0.3%       +0.4% Euro-zone Retail Sales        (YoY)    +0.1%       - 0.1%February Italian Services PMI                          49.3           47.2 French Services PMI                          57.0           58.2 German Services PMI                        51.0           52.2 Euro-zone Services PMI                     52.3           52.3 Euro-zone Composite PMI                  52.7          52.8 U.K. Services PMI                             52.0           54.0 U.K. BRC Shop Price Index (MoM)   +0.5% (prior) +0.4% U.K. BRC Shop Price Index (YoY)    +1.2% (prior) +1.3%The services PMI numbers underlined the stabilization and possibly mild improvement in the European economy together with retail sales in January. This will be a comforting sign for the ECB though the credit crisis will still prevent them from hiking rates today. European officials are concerned with inflation but are relying on the slowdown in the economy to reign in inflationary pressures – even if OPEC are still turning the screws. Still, European banks continue to announce writedowns stemming from subprime investments, the latest being Credit Agricole which increased its anticipated writedowns to €3.3bn. Still European banks are well capitalized but there could still be some tightening in credit restrictions that will restrain lending in the prior manner and in turn contribute more to the slowdown. States releases overnight:Q4                                                     Forecast    Actual U.S. Non Farm Productivity          (QoQ)   +1.8%    +1.9%January U.S. Factory Orders                    (MoM)   - 2.5%   - 2.5%February U.S. Challenger Job Cuts             (YoY)               -14.2%  U.S. ADP Employment Change                    15K     - 23K U.S. ISM Non-Manufacturing Composite       48.0       49.3 It was a mixed bag of results yesterday. Factory orders came in as expected but still saw a drop of -2.5% over January. However U.S. companies are still turning the screws to improve productivity to contain the slowdown which is a positive sign in the medium to long term by increasing their longevity.The ISM non-manufacturing actually came in above expectations to confound the doomsayers with even new orders higher along with inventory sentiment and employment… However, pretty much as expected the slowdown has begun to hits jobs more. ADP reported a 23K loss though the interesting part of this was the gain in service jobs while goods producing jobs loss 70K. Challenger also reported a -14.2% YoY drop in February compared to -19.1% in January. A comment from Challenger does outline the general deterioration in the jobs market; “While job cuts were down slightly, increased layoffs by government agencies and retailers provided further evidence that the impact of the housing slump is spreading beyond the housing and financial sectors.”This appears to have been reflected in the weekly jobless claims numbers and set up tomorrow’s non-farm payrolls as a key catalyst tomorrow. All in all, the situation was still summed up in the Fed’s Beige Book which observed: “Reports from the twelve Federal Reserve Districts suggest that economic growth has slowed since the beginning of the year. Bearish sentiment was seen in the housing market and retail sales. It also confirmed rising costs of materials and energy in almost all districts. No surprises there…Elsewhere US Treasury Paulson reported that the economy was slowing “appreciably.” However, he maintained that the U.S. economy’s “long-term economic fundamentals are solid, and I believe our economy will continue to grow this year, although not as rapidly as in recent years.”Still no surprises…And the calls for concerted central bank intervention continue. The German economic advisor, Peter Bofinger, who is part of the “wise men” of Europe commented “intervention in the currency markets to prevent a further appreciation of the euro does not endanger price stability and is therefore feasible without any problem. The ECB is not using its options and is thus jeopardizing the compositeness of the Euro-zone economyThe Wall Street Journal also ran an article on the pressure from European officials for concerted CB intervention. I can only repeat my comments earlier this week that while central banks have veered away from such action over the past 10-15 years current market circumstances cannot in any way be described as normal. Indeed, it is in the interests of the U.S. to ensure that a too rapid decline in the Dollar does not further worsen the inflationary spiral in the U.S. which would further dampen consumer demand, thus wiping out the effects of the fiscal stimulus package. The Dollar had another whippy day, first seeing a modest recovery but reversed to close around recent lows and actually reached a new record high of 1.5300 level against the Euro. Sentiment continues to keep the Dollar under pressure but momentum has not been at all bearish since Monday’s spike lower. Technically I can point to reasons to buy Dollars but the will is not there. If there is to be any strength it should come from one of two areas – from central bank intervention or from better than expected numbers from the States over today and tomorrow to force a squaring in short positions. Both seem very unlikely at this point… More later once the daily analysis has been done… The following are economic releases from Asia due today:Australia – January Trade Balance                      AUD     -2.55bn Building Approvals               (MoM)     +6.0% Building Approvals                (YoY)     +6.0%Japan January Leading Economic Index (P)    30.0% January Coincident Index (P)              22.2% February Machine Tool Orders (YoY)  9 application/xml false ADP central bank challenger currencies employment European Factory Orders Forex FX intervention ISM Non-Manufacturing PMI retail sales US New to Forex? 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