Releases from Europe:
                                                Prior     Revised
Swiss SECO 2008 GDP Forecasts   +1.7%  +1.5%

February                                Forecast     Actual
French Producer Prices    (MoM)  +0.5%     +0.4%
French Producer Prices     (YoY)  +4.9%     +4.9%
Italian PPI                    (MoM)  +0.5%     +0.7%
Italian PPI                     (YoY)  +5.2%     +5.7%
Euro-zone M3                 (YoY)  11.5%     11.3%

No surprises from the European data releases so far this morning but there’s plenty to come albeit that nothing is likely to spring much of a surprise. Italian PPI was a touch firmer than forecasts which will keep Trichet vigilant but more emphasis will be placed on this week’s CPI numbers.

The Dollar consequently has remained within Friday’s ranges with the market beginning to give up hope that something will push the boundaries today.

The following economic releases are due today:

March
Euro-zone CPI (Est)                 (YoY)    +3.3%
Italian CPI (P)                       (MoM)    +0.3%
Italian CPI (P)                        (YoY)    +3.1%
Euro-zone Business Climate Indicator       0.70
Euro-zone Consumer Confidence            -12.0
Euro-zone Economic Confidence             100.0
Euro-zone Industrial Confidence                1.0
Euro-zone Services Confidence                10.0
U.S. Chicago PMI                                   46.5

The week has begun relatively quietly with subdued numbers from both Australia and Japan. The latter faces a stronger test tomorrow when the BOJ’s Tankan report is expected to show a substantial decline in corporate outlook as the combination of a stronger Yen and weaker demand threatens to force a hemorrhaging of the country’s export strength.

There are even one or two suggestions of softening in Europe also as the retail PMI’s provided a soggy outlook caused by consumer’s reactions to the threat of higher food and energy prices eating into their wealth.

Recessions are commonly a result of consumers protecting their wealth as they react to destabilizing factors around them. Right now we are seeing how higher credit spreads, tighter credit requirements and ballooning prices provide a spreading dis-ease. Indeed the symptoms are infectious.

The Fed and the U.S. administration have already reacted to this by cutting rates and forcing through fiscal and mortgage plans. The rest of the world has looked on and declared that they are not in the same boat.

Indeed, right now they are right. However, just 10 months ago the U.S. would have said the same. The onset of the symptoms has been more rapid than expected in the States.

While the ECB appears to remain aloof it is quite aware of the risks. It continues to inject liquidity when required and has pulled back sharply from a tightening in monetary policy. It may emit an air of confidence but its actions belay more caution.

If the rest of the world is going to catch the same dis-ease from the States it will come through the consumer. Oil prices and inflation provide the incubation conditions. Combined with persistent tight credit conditions, any lack of confidence in the consumer is going to stem the blood flow from industry.

We can’t say with any confidence that a collapse will occur. However, Japan is already very vulnerable with the strong Yen and reduced export demand. Any LBO failures in Europe and the result could be more devastating that SARS, bird flu and AIDS.

Note important support and resistance areas:

         USDJPY        EURUSD       USDCHF       GBPUSD
Res:  100.37-64    1.5901-07    1.0064-08    2.0028-48
Res:    99.80-15    1.5815-37    1.0005-23    1.9910-40

Spt:     98.81-30    1.5725-40    0.9910-15    1.9816-48
Spt:     98.37-54    1.5655-82    0.9846-79    1.9733-56

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