Latest news on Asian Morning Update 19th March 2008
| Lack of reasons to sell further has disappointed the market European releases overnight: January February
ECB members continue to highlight inflationary pressures and retain their hawkish tone though appear resigned that they are unable to hike rates at this moment.
States releases overnight: February Forecast Actual Overall the numbers from the States are moderately positive though do not indicate any real turnaround at this time. Housing starts were better than expected but with building permits now at their slowest pace in 17 years there is little confidence in the industry. Of course the main news of the day was the 75bp cut by the Fed. Some say it was lower than forecast but frankly that’s being a bit churlish. The same people would cast accusations that the Fed would have left little ammunition for further easing if they had cut by a full 100bp. It still represents an effective easing to smooth out some of the problems in the credit markets. Never-the-less, whether it had been 75bp or 100bp the degree of panic and fear still leaves the markets under stress and this is causing wider lending margins and a greater reluctance to lend. Ironically this in itself could generate severe pressure which might otherwise be avoided. The Fed statement didn’t provide much joy either highlighting the deepening of the housing contraction which is also likely to weigh on economic growth over the next few quarters. They are also mindful that inflationary pressures have firmed which caused 2 of the FOMC members to vote against a 75bp cut for something less. Paulson though took a more proactive approach. While admitting the sharp decline he preferred to concentrate on the fiscal stimulus package which ha claimed could generate hundreds of thousands of jobs once tax rebate checks begin flowing in May. “It will start making a difference here in the second and third quarter, maybe adding 500,000 or more jobs,” he said. The market took the news of the cut with what appears to be a blank look. Having held a bearish Dollar rage for the past few days the market seemed to be lost with what to do following the announcement. However, with some of the extreme emotion taken away by the slightly better than expected quarterly results from Goldmans and Lehmans together with the long Easter weekend coming the result was a squaring of positions which has seen the Dollar rally. There are a few early signs of a bottoming formation but there is a long, long way to go before we could even begin to suggest the Dollar has bottomed. Any rally will be seen as an opportunity to find better levels to sell. However, for the next few days we should see a nervous calm enter back into the market. Range trading is more likely than any sustained move in either direction.
Australia Japan The cabinet office is due to publish their monthly economic report See Also
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