» Asian Morning Update 3rd March 2008

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Asian Morning Update 3rd March 2008

Dollar starts the week with mixed performances

European releases overnight:

December Forecast Actual
Italian 2007 GDP +1.7% +1.5%

January
U.K. M4 Money Supply (F)   (MoM)     +1.3%   +1.4%
U.K. M4 Money Supply (F)   (YoY)    12.9%   13.1%
U.K. M4 Sterling Lending       GBP    21.6bn 21.8bn
Euro-zone CPI                   (MoM)     - 0.4%  - 0.4%
Euro-zone CPI                    (YoY)     +3.2% +3.2%
Euro-zone CPI Core            (YoY)      +2.0%   +1.7%
Euro-zone Unemployment Rate           7.2%     7.1%

February
German CPI                      (MoM)     +0.4%   +0.5%
German CPI                       (YoY)     +2.7%   +2.8%
Italian CPI                        (MoM)     +0.2%   +0.3%
Italian CPI                         (YoY)     +2.9%   +2.9%
Euro-zone Business Climate Indicator   0.75     0.72
Euro-zone Consumer Confidence         -12.0   - 12.0
Euro-zone Economic Confidence          101.2   100.1
Euro-zone Industrial Confidence             1.0        0.0
Euro-zone Services Confidence             11.0      10.0
Swiss KOF Consumer Confidence            1.6      1.65

Following a week which saw the European currencies benefit from the fallout in the Dollar the figures on Friday don’t really paint a particularly positive picture. Italy went into the New Year on the back of a lower than expected 2007 GDP, inflation remains high and the business outlook and confidence numbers were soft.

A hint of what may be to come was outlined in a statement from UBS, itself having to announce writedowns from subprime losses. They estimate that there may well be another $440 billion in losses to come from the current financial crisis. That is on top of the $160 billion already announced.

A telling comment on how the globalization bubble has caused looser risk standards came from Geraud Charpin, head of European credit strategy at UBS in London.

“Leveraged risk positions are a cancer in this market and the sooner it is treated the better.”

U.S. releases overnight:

January                                           Forecast   Actual
U.S. Personal Income            (MoM)    +0.2%    +0.3%
U.S. Personal Spending          (MoM)    +0.2%   +0.4%

February
U.S. Chicago PMI 49.7 44.5
U.S. University of Michigan Confidence 70.0 70.8

Stateside numbers were mixed. Personal income & spending and the University Michigan Confidence were marginally better than expected while the Chicago PMI was disappointingly much lower.

As a measure of the concern that some, and probably most, Fed members hold about inflation came from Poole who was pushing for the Fed to reverse the interest rate cuts as soon as they are not needed.

The implication is clear but a two-edged sword. The risk of provoking worse inflation is obviously a prime concern. However, the fact that they have (temporarily) abandoned this mandate is testament to just how bad they view the current economic position.

Friday returned mixed results for the Dollar though this morning has continued its sharp decline against the Yen and Swiss Franc but remains in sideways ranges against the Euro and Pound. At the same time it made firm gains against the Aussie and Canadian Dollars.

Frankly it seems as if the losses are overdone against the Yen and Swissie while the muted reaction against the Euro and Pound perhaps suggest there is room for a period of range trading. However, any correction would be very nervous and until the market can generate any reason to buy the Dollar any upticks will likely be nervous and erratic.

More later once the daily analysis has been done…

The following are economic releases from Asia due today:

Australia – February
AIG Performance of Manufacturing Index
TD Securities Inflation (MoM)
TD Securities Inflation (YoY)

Japan
January Labor Cash Earnings (YoY) +0.1%
Japan Machine Tool Orders (YoY)