Focus today is at the German IFO figures.
MAJOR HEADLINES – PREVIOUS SESSION
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AU NAB Dec Business Confidence Index at -20 vs -30 prior
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AU NAB Dec Business Conditions Index at -6 vs -17 prior
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NZ outlook has deteriorated since Dec, closer to Treasury worst case – Fin Min
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NZ Fin Min expects further central bank interest rate cuts to combat downturn
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JAPAN GOVT TO INJECT FUNDS INTO FIRMS BY BUYING SHARES
THEMES TO WATCH – UPCOMING SESSION
Events Today:
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Germany Import Price Index (0700)
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Sweden PPI(0830)
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EU Current Account Balance (0900)
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Germany IFO Business Climate Index (0900)
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UK Distributive Trades Balance (1100)
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US Consumer Confidence Index (1500)
Market Comment:
Despite the apparent shift in sentiment following better-than-forecast US data releases late yesterday, headlines have been dominated by job cuts, job cuts and more job cuts – among them 20,000 at caterpillar, 26,000 at Pfizer/Wyeth and 6,000 at Philips. With job losses mounting daily it is difficult to envisage that the global economic woes are far from over, and the shift in sentiment will still have to be viewed as a temporary phenomenon.
Signs that difficulties for the broader populace are increasing can be seen from the rising reports of civil unrest and demonstrations. Greek farmers have stepped up their protests against low agricultural prices by blocking border crossing into Bulgaria, after similar blockages at the borders with Macedonia, Turkey and Albania, and blocking highways from Athens to major cities. German rail unions have warned of a one-day strike on Thursday over pay and working hours while weeks of street protests and demonstrations in Iceland have resulted in the fall of the recently formed coalition. The IMF did however confirm that it would continue to support Iceland under the IMF-backed loan programme, as long as “appropriate” policies are in place.
On a more positive note, Australia reported some above forecast data today, with the business confidence index in Dec rebounding from record lows in Nov. Conversely, NZ Fin Min English was on the wires saying the economic outlook for NZ had deteriorated since Dec and was now near the Treasury’s worst-case scenario. He foresaw more rate cuts from the RBNZ to counter the deterioration. The next RBNZ rate meeting is on Thurs.
In the US, Timothy Geithner was sworn in as US treasury secretary, overcoming misgivings by some Senators about his failure to pay some taxes previously, and vowed to act quickly to protect the US economy from the worst financial crisis since the Great Depression. His move across the the Treasury means that a new NY Fed governor will be announced later today.
In FX-land, the Asian session was dominated by news that the Japan government would be putting public money into companies whose capital had been hurt by the financial crisis and were facing difficulty in fund-raising. The Nikkei surged on the news and JPY crosses were bought, though the moves were exaggerated given the tin liquidity conditions that existed due to the Lunar New Year celebrations in most Asian centres. Once the knee jerk reaction was over however, we retreated back towards pre-news levels.
CHART: USDJPY
USDJPY activity has been confined to the wedge formation in recent sessions and today looks to conform accordingly. Look to trade in the direction of the breakout.
