INVESTICA LTD  ^{Understanding Markets}

    12-05-08                     All the important market developments will be here updated throughout the day.

The latest market alerts and analysis

Lower UK deficit. The goods deficit fell to GBP7.4bn in March from GBP7.6bn while the overall balance narrowed to an 11-month low of GBP4.0bn

 

High UK PPI. Producer prices continued to rise strongly in April with input prices rising 2.4% over the month with an annual increase of 23.3%. There was also a core output price increase of 1.0% will increase fears that inflationary pressure is building.

 

Instant analysis: The data will illustrate the difficult position faced by the Bank of England and will make it more difficult for the bank to cut rates.

 

09-05-08. Lower US trade deficit. The US trade deficit fell to US$58.2bn in March from US$61.7bn the previous month. Imports fell significantly over the month which will lessen any immediate dollar support from a lower deficit

 

08-05-08. Trichet little changed. ECB Chairman Trichet has not altered his testimony significantly which has triggered some fresh Euro buying

 

ECB on hold. The ECB has also left rates on hold at 4.0% at the latest council meeting

 

UK rates on hold. The Bank of England held interest rates at 5.00% following the latest MPC meeting

 

Official dollar concerns?. There have been media reports that the European and US authorities are more concerned over the dollar's value and will look to push the currency stronger

 

07-05-08. German factory orders fall. German factory orders fell 0.6% in March after a revised 0.6% drop the previous month which will reinforce speculation over a sharp slowdown in the Euro-zone

 

Euro-zone sales drop. Euro-zone retail sales fell 0.4% in March with a 1.6% annual decline which will reinforce fears over a slowdown in the economy

 

Weak UK industrial data. UK industrial production fell 0.5% in march for a 0.6% annual increase which will reinforce speculation over an interest rate cut on Thursday

 

06-05-08. Weak UK PMI index. The PMI index for the services sector dipped to 50.4 in April from 52.1 which will revive speculation that interest rates could be cut this week

 

05-05-08. Firm US PMI. The US PMI index for the services sector rose to 52.0 in April from 49.6 the previous month. Employment was above the 50.0 level and prices stayed high.

 

Instant analysis: The data will reinforce the more positive mood towards the US economy and dollar

 

02-05-08. Slower employment fall. US non-farm payrolls fell by 20,000 in April after a revised 81,000 decline for March and unemployment fell to 5.0% from 5.1%. There was only a small increase in government employment and the labour-force survey was strong.

 

Instant analysis:  There will be a further reassessment of the economic prospects following the employment data which will underpin the US currency 

 

Weak UK housing data. The UK Halifax House price index recorded a further 1.3% decline in April with an annual decline of -0.9% which will maintain fears over the housing sector.

 

01-05-08. PMI little changed. The PMI index for manufacturing was unchanged at 48.6 for April compared with expectations of a small decline which will further ease immediate fears over deep recession

 

Mixed US data. US jobless claims rose to 380,000 in the latest week from 345,000 previously, but there was a higher than expected increase of 0.2% for the core PCE inflation index which will maintain some inflation fears

 

UK PMI little changed. The UK PMI index for the manufacturing sector fell to 51.0 in April from 51.3 but this was slightly better than expected which should offer some near-term Sterling support.

 

30-04-08. Fed cuts by 0.25%. The Federal Reserve has cut interest rates by 0.25% to 2.00% by a 8-2 vote with 2 members voting for unchanged rates. The Fed dropped references to downside growth risks which suggests a pause is now likely which should offer some dollar protection.

 

GDP stays above zero. US first-quarter GDP was weak at 0.6%, but this was marginally stronger than expected and there will be relief that the economy did not contract

 

Positive ADP report. The US ADP report recorded a 10,000 increase in employment compared with expectations of a significant decline for the month which should create some optimism over the Friday payroll report

 

Weaker KOF index. The Swiss KOF index weakened further to 1.20 in April from a revised 1.40 in March and has fallen sharply from a peak above 2.00 over the past six months which will fuel fears over a sharp Swiss slowdown

 

Lower EU CPI. Euro-zone consumer inflation dipped to 3.3% in April from 3.6% which will ease inflation fears to some extent and take some pressure off the ECB

 

UK housing fears. The Nationwide Bank reported a decline in house prices of 1.1% for April with a small decline over the year which will reinforce fears over the housing sector and tend to keep Sterling on the defensive

 

29-04-08. US confidence still weak. US consumer confidence fell to 62.3 in April from a revised 65.9 the previous month, although the expectations component edged marginally higher. Fears over spending trends will continue.

 

Weak UK sales. The CBI retail sales report recorded a sharp drop to -26 in April from +1 the previous month with expected sales also weak and this will reinforce fears over a sharp downturn in consumer spending

 

Lower UK mortgage approvals. Total UK mortgage approvals fell to 64,000 in march from 74,000 previously which was the lowest on record and will maintain fears over the UK housing sector

 

28-04-08. Lower German inflation. German consumer prices fell a provisional 0.2% in April with a year-on-year increase of 2.4% which will lessen fears over inflation to some extent and curb Euro buying support.

 

25-04-08Higher US inflation expectations. The University of Michigan consumer confidence index weakened further in late April, but inflation expectations rose and the Fed will, therefore, need to be on high alert over inflation

 

Slower UK growth. Quarterly UK GDP growth slowed to 0.4% in the first quarter from 0.6% with annual growth at 2.5%

 

24-04-08. Weak US home sales. US new home sales fell to an annual rate of  526,000 in March will will dent near-term dollar optimism to some extent.

 

Mixed US durables. Headline durable goods orders fell by 0.3% in March, butt here was a 1.5% increase in core orders which is a positive sign. The number of initial jobless claims also fell to 342,000 in the latest week which will increase hopes for a more stable job market

 

Weak UK sales. UK retail sales fell by 0.4% in March after a revised 1.1% increase the previous month. The data will reinforce expectations over a slowdown in the economy, although it was close to expectations which should lessen any selling pressure on the UK currency, especially with upward revisions

 

Weak IFO survey. The German IFO survey weakened to 102.4 in April from 104.8 previously which will undermine the Euro in the short term

 

23-04-08. Split MPC vote. The Bank voted by 6-2-1 decision to cut rates in April. Two members wanted no change in rates while Blanchflower wanted a bigger 0.50% rate cut.  The two votes for no change will lessen expectations of further aggressive rate cuts in the short term.

 

Mixed Euro PMIs. The manufacturing PMI index for the Euro-zone dipped to 50.8 in April from 52.0, but the services-sector index edged higher

 

22-04-08. Tough ECB talk. Tough ECB talk has pushed the Euro to a fresh record high above the 1.60 level against the dollar

 

BOC rate cut. The Bank of Canada has cut interest rates by 0.50% to 3.00% at the latest policy meeting and is expecting rates to be cut again, although the timing is uncertain.

 

Firm BOE comments. Monetary Policy Committee member Besley has taken a firm stance on policy by stating that the bank should concentrate on price stability and not counter downward economic shocks which will underpin Sterling

 

21-04-08. BOE doubts. Doubts whether the Bank of England plans to issue new bonds which can be switched for mortgage-backed securities has pushed Sterling weaker.

 

18-04-08. Risk aversion eases. Risk tolerances improved on Friday as credit and equity markets rallied and there was significant weakness for the yen and Swiss franc

 

17-04-08. Phil. Fed, Weakens. The Philadelphia Fed index weakened to -24.9 in Aril from -17.4 which will be a negative short-term dollar factor. The impact will be offset by a significant increase in six-month business confidence.

 

Subdued CAD inflation. Canadian core consumer prices rose 0.2% in march with the annual increase falling to 1.3% from 1.4% which will give the Bank of Canada some flexibility over cutting rates.

 

16-04-08. US CPI in line. US consumer prices rose 0.3% in March with a 0.2% core increase and this will not have a major impact.

 

US housing disappointment. The US housing starts fell to an annualised rate of 950,000 in march while there was also a drop in building permits which will renew fears over the housing sector and tend to undermine the dollar

 

Higher Euro inflation. The March Euro-zone inflation estimate was revised up to 3.6% from 3.5% which will maintain ECB fears over inflation

 

Weaker UK employment. The UK unemployment claimant count fell by only 1,200 in March while there was a revised increase of 600 in February, the first increase for 17 months which will maintain expectations of a weaker economy.

 

15-04-08. New York recovery. The New York Empire manufacturing survey rose to 0.6 in April from -22.2 the previous month. Although the data is very erratic, there will be some hopes for a recovery which will underpin the dollar

 

ZEW weakens. The German ZEW index weakened to -40.7 in April from -32.0 the previous month, contrary to expectations of a slight recovery which will unsettle the Euro.

 

Subdued UK inflation. UK consumer inflation held steady at 2.5% in march with the core figure also steady at 1.2% which will erode near-term Sterling support.

 

14-04-08. Weak UK data. The RICS index weakened to -78.5% in March, the worst figure since 1978 while the BRC retail sales index recorded a 1.6% annual decline, the worst figure for three year. The data combined will reinforce fears over the UK economy.

 

US sales edge higher. US retail sales rose 0.2% in March with a 0.1% core increase which should not have a significant impact

 

PPI higher. UK input prices rose by a further 1.8% in march to give a 20.6% annual increase while output prices rose 0.9%, although the core increase was more moderate at 0.3%

 

13-04-08. G7 changes stance. The G7 members have adopted a change in their stance on the dollar. They stated that they were concerned over the recent currency moves which had potential implications for economic and financial stability.

 

Instant analysis:  The G7 stance will offer short-term dollar backing, but the key is whether the concern will be backed up with action.

 

11-04-08. US confidence weak. The University of Michigan consumer confidence index fell to a fresh 26-year low of 636.5 for April which will maintain fears over the economy ahead of the US retail sales data on Monday

 

10-04-08. Higher US deficit. The US trade deficit rose to US$62.3bn in February from US$59.0bn the previous month as oil imports rose, although the export performance was firm which will offer some encouragement.

 

Lower US jobless claims. US jobless claims fell to 357,000 in the latest week from 410,000 which will ease immediate fears over the labour market

 

ECB on hold. The ECB has left interest rates on hold at 4.00% at the latest council meeting

 

UK rate cut. The Bank of England has cut interest rates by 0.25% to 5.00%. The bank pointed to tightening credit conditions and the potential for inflation to fall later in 2008.

 

Instant analysis:  The decision should have a muted response, but overall Sterling confidence will remain weak.

 

UK deficit dips. The visible UK trade deficit was GBP7.5bn for February from a revised GBP7.9bn in January. The mix of subdued exports and lower imports will tend to be a slight negative factor for Sterling.

 

09-04-08. UK production higher. UK industrial production rose 0.3% in February which will not have a significant impact

 

08-04-08. Fed fears. Minutes from the March FOMC meeting stated that the Fed was concerned over a severe slowdown and that the economy could contract in the first half of 2008. There were also inflation fears while the minutes stated that it was difficult to calibrate policy.

 

Instant analysis:  The minutes will tend to unsettle markets to some extent and weaken the dollar slightly, although the inflation comments should limit selling pressure.

 

UK house prices fall. The Halifax Bank house price index recorded  sharp 2.5% decline in house prices for March with the annual increase falling to 1.1% which will maintain fears over the UK housing sector.

 

07-04-08. Risk aversion eases. Levels of risk aversion have eased at the start of this week which has weakened the yen and Swiss franc

 

04-04-07. Payrolls fall. US payrolls fell 80,000 in March and the unemployment rate rose to 5.1% from 4.8%. There were declines in manufacturing, construction and financial employment over the month

 

Instant analysis:  The data will revive expectations over a 0.5% Fed rate cut and hurt the dollar, although caution is required as the Fed will need to be forward looking over the data and economy.

 

CAD unemployment rises. Canadian unemployment increased to 6.0% in March from 5.8%, but the increase in employment was close to expectations at 14,600 and the impact should be limited.

 

PMI edges higher. The PMI index for the services sector rose to 49.6 in March from 49.3 which marches the trend seen in the manufacturing sector and is a small boost to the dollar

 

Jobless claims jump. US jobless claims increased sharply to 407,000 in the latest week from 369,000 previously which was the highest figure for 30 months and will revive fears over the March payroll data.

 

UK Credit tighter. The latest Bank of England credit conditions survey also reported a further tightening of conditions and rising corporate failures which will increase pressure for lower interest rates

 

UK PMI disappointment. The UK PMI index for the services sector dipped to 52.1 in March from 54.0 the previous month which will reinforce expectations of a sharp slowdown in the economy and this will undermine Sterling

 

02-04-08. Bernanke cautious: Fed Chairman Bernanke warned that the economy could contract slightly in the first half of 2008. He stated that it should pick up in the second half, but that the risks were to the downside.

 

Instant analysis:  Bernanke's caution will tend to unsettle the dollar to some extent in the short term

 

ADP boost. The ADP employment report recorded an increase in employment of 8,000 for March after a revised 18,000 decline the previous month which will provide some reassurance that conditions are not deteriorating rapidly.

 

Weaker UK construction. The UK PMI construction index dipped to below the 50.0 level for March which will increase fears over a sharp slowdown in the sector. but consumer credit card borrowing was firm.

 

01-04-08. US PMI higher. The US PMI index for the industrial sector rose slightly to 48.6 in March from 48.3 while there was a strong reading for prices

 

Instant analysis:  The small increase will continue to foster some hopes that the US economy could secure some sort of recovery

 

UK PMI little changed. The UK manufacturing PMI index was little changed at 51.3 for March.

 

Swiss PMI weaker. The Swiss PMI index weakened to 55.3 in March from 60.5 the previous month which will reinforce expectations of a sharp slowdown in the domestic economy

 

 

 

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