» Asian Morning Update 8th May 2008

Is the tide turning..?

European Releases overnight:

March                                                Forecast    Actual
U.K. Industrial Production         (MoM)    - 0.1%    - 0.5%
U.K. Industrial Production          (YoY)    +0.8%    +0.2%
U.K. Manufacturing Production   (MoM)    +0.0%    - 0.5%
U.K. Manufacturing Production    (YoY)    +1.2%    +0.6%
Euro-zone Retail Sales             (MoM)    +0.1%    - 0.4%
Euro-zone Retail Sales              (YoY)    - 0.6%    - 1.6%
German Factory Orders             (MoM)    +0.2%    - 0.6%
German Factory Orders              (YoY)    +5.7%    - 5.0%

April
U.K. BRC Shop Index                            +0.2%     +0.1%  

States releases overnight:

March     
U.S. Pending Home Sales         (MoM)   - 1.0%    - 1.0%
U.S. Consumer Credit                USD      6.5bn    15.29bn

Last night saw numbers that reflect the massive slumps in both European industrial and consumer activity. As highlighted yesterday, Paulson may be right in saying that the worst is over in the credit crisis but that is no longer the issue when it comes to recession.

Most recessions are a product of a slump in consumer demand and this is ringing out loud right now as global consumer confidence is also under enormous pressure as oil and food prices retain their upward path.

Yesterday’s U.K. Nationwide consumer confidence number reflected that and the Euro-zone retail sales number is a mirror for that lack of confidence. It should come as no surprise that industrial production is lower in the U.K., is showing signs of deterioration in mainland Europe and German factory orders have buckled under the weight of reduced demand.

It comes as some surprise then that U.S. consumer credit was more than twice consensus forecast. This is the biggest rise since November. Perhaps it is evidence that credit restrictions are loosening. However, once swallow doesn’t make a summer but at least the signs are more positive.

Except that pending home sales fell and while March’s decline was in line with forecasts the hidden damage came from the February number which saw the index revised lower by 0.8 to 83.8. That was quite a sharp revision and remains the skeleton that has escaped the cupboard and haunts the halls of the Fed.

The combination of the rather black numbers from Europe together with the hope that the U.S. consumer credit numbers instilled in the market was enough to push the Dollar back to last week’s highs. Indeed, there is chance that it will push through to new high but will have to wait for the rate decisions from the BOE and ECB.

Not that any change is expected and that any change in statements are likely but the market will no doubt respect the releases and wait to make their move. The only risk to this comes from the early data being released, German industrial production and trade balance. Should these provide as dismal reading as last night’s figures the risk is for the Dollar to break to new highs.

Until then the emphasis will be on twanging elastic bands at flies buzzing around trading rooms…

More later once the daily analysis has been done…

The following releases are due from Asia due today:

Australia- April
Employment Change     10.0K
Unemployment Rate      4.1%
Participation Rate         65.2%

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