WEEKLY MARKET RECAP, WEEK AHEAD, AND SCHEDULE
7 October 2007

Sunday 

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€

The euro depreciated vis-à-vis the U.S. dollar last week as the single currency tested bids around the $1.4030 level and was capped around the $1.4060 level. The pair lost about 135 pips last week.  Fed Chairman Bernanke said the U.S. housing correction has more room to run and warned that inflationary pressures are escalating.  Fed’s Kohn said last month’s 50bps was the first approximation of what needed to be done and added it “will not be able to avert all of the weakness in the economy.”  The German media reported the Fed has resisted calls from other countries for joint intervention.

ECB’s Trichet verbally intervened saying U.S. authorities still support a strong dollar. Eurogroup’s Juncker said the strong euro “worries us a lot.” Spain’s Vegara said the yen and yuan should bear more of the USD’s adjustment. Trichet noted money and credit growth remains “vigorous” and said inflation will remain above 2.0% until 2008 but dropped “accommodative.” The ECB kept its main refinancing rate unchanged.

Data released in the U.S. last week saw the September ISM manufacturing activity index weaken to 52.0 from 52.9; the prices paid index fell to 59.0 in September; U.S. Redbook retail sales were up +0.3% m/m; the September non-manufacturing ISM index fell to 54.8; the ADP National Employment Report noted 58,000 private-sector jobs were created in September from a revised 27,000 in August; August headline factory orders were off 3.3% with the ex-transportation component off 1.7% and the orders for non-defense capital goods ex-aircraft component off 0.5%; weekly initial jobless claims were up 16,000 to 317,000; continuing jobless claims were off 10,000 to 2.541 million; September non-farm payrolls saw 110,000 jobs created with a +91,000 upward revision to August’s tally; the September unemployment rate printed at 4.7%; and September average hourly earnings were up +0.4%.

Data released in the eurozone last week saw final September manufacturing PMI was at 53.2; German September manufacturing printed at 54.9; EMU-13 August unemployment printed at 6.9%; EMU-13 August PPI was up +0.1% m/m and 1.7% y/y; EMU-13 August retail sales were up +0.1% m/m and +1.0% y/y; the EMU-13 September services PMI survey fell back to 54.2 from 58.0 in August; and German August new orders for machinery and plant were up 14% y/y.

Technical Outlook

Last week’s high (1) represents a new lifetime high and last week’s low (2) was right around the 23.6% retracement of the 1.3261–1.4280 range.  The 1.4340/ 1.4425/ 1.4560 levels represent upside resistance targets while the 1.4063/ 1.3939/ 1.3828/ 1.3712/ 1.3626/ 1.3555 levels represent downside support targets.

¥/ CNY

The yen depreciated vis-à-vis the U.S. dollar last week as the greenback tested offers around the ¥117.30 level and was supported around the ¥114.70 level.  The pair gained about 220 pips last week. The Nikkei 225 stock index closed the week at ¥16,785.69.  BoJ’s Iwata reported “The impact of the US subprime mortgage problems on the Japanese financial system is limited at the moment. And our short-term financial markets are showing more stable movements compared with the US and European markets. Persistent drops in share prices and a continued high yen would have a negative impact on the economy going forward, and we should watch out for it.”

Data released in Japan last week saw the Q3 Tankan large manufacturers’ diffusion index print at +23; the Tankan all-industries combined capital expenditures plans improved to 4.9% from 3.1% in Q2; August average overall income rose +0.1% y/y; the September monetary base was up +0.7% y/y; the index of leading economic indicators fell to 30.0 from 72.7 in July; the August coincident index improved to 83.3 from 70.0 in July, and September foreign reserves climbed US$ 13.44 billion to US$ 945.60 billion.

The Chinese yuan depreciated vis-à-vis the U.S. dollar last week as the greenback closed at CNY 7.5061 in the over-the-counter market, up from CNY 7.5036.  China launched its state-owned foreign reserves investment company and it will manage US$ 200 billion.

Technical Outlook

Last week’s high (1) was just the 50.0% retracement of the 124.13-111.59 range and last week’s low (2) was just above the 23.6% retracement of the same range. Upside resistance targets remain the 117.86/ 118.34/ 119.28/ 120.42 levels while downside support targets remain the 116.38/ 115.55/ 114.55/ 112.90/ 112.55 levels.

₤

The British pound depreciated vis-à-vis the U.S. dollar last week as cable tested bids around the US$ 2.0275 level and was capped around the $2.0495 level.  The pair lost about 45 pips last week.  U.K. banks are said to be bidding on liquidity from the ECB instead of the BoE. BoE’s MPC kept the repo rate unchanged at 5.75%. 

Data released in the U.K. last week saw final M4 money supply growth of an annualized 13.5%; August consumer lending fell to ₤9.5 billion; Hometrack September house prices were unchanged m/m and up 5.0% y/y;  the September CIPS manufacturing PMI survey fell back to 55.1; BoE Q2 housing equity withdrawal fell back to ₤10.0 billion; BoE mortgage approvals fell to 109,000 in August; BoE net mortgage lending fell to ₤8.5 billion; September construction PMI fell to 60.3 from 64.8 in August; September services PMI fell to 56.7; the BRC September shop price index was up +0.2% m/m and +0.4% y/y; Nationwide Q3 annual house price growth was at 9.3%; Halifax September house prices were off 0.6% m/m and up 10.7% y/y; August construction orders were off 8.0% q/q; and median pay settlements were up 3.2% in the three months to September. 

Technical Outlook

Last week’s high (1) was above the 76.4% retracement of the 2.0653-1.9651 range and last week’s low (2) was right around the 61.8% retracement of the same range. Upside resistance targets include the 2.0653/ 2.0775/ 2.0910 levels while downside support targets include the 2.0410/ 2.0306/ 2.0270/ 2.0152/ 2.0015 levels.

CHF

The Swiss franc depreciated vis-à-vis the U.S. dollar last week as the greenback tested offers around the CHF 1.1855 level and was supported around the CHF 1.1620 level. The pair gained about 140 pips last week.  Credit Suisse lifted its 2007 GDP forecast to 2.5% from 2.2%. The Swiss government raised its 2007 GDP forecast to 2.6% from 2.3%.

Data released in Switzerland last week saw the September PMI survey fall to 57.6 from 65.1 in August and September CPI was up +0.1% m/m and +0.7% y/y.

Technical Outlook

Last week’s high (1) was below at the 23.6% retracement of the 1.2768-1.1624 range and last week’s low (2) was below the 23.6% retracement of the 1.2468-1.1624 range.  Upside resistance targets include the 1.1894/ 1.1934/ 1.2064/ 1.2162/ 1.2213/ 1.2285 levels while downside support targets include the 1.1757/ 1.1624/ 1.1481/ 1.1320/ 1.1286 levels.

CAD

The Canadian dollar appreciated vis-à-vis the U.S. dollar last week as the greenback tested bids around the C$ 0.9805 level and was capped around the C$ 1.0015 level.  The pair lost about 120 pips last week.  The European Commission cleared Anglo-Australian mining company Rio Tinto to purchase Canada’s Alcan for C$ 38.1 billion. Mark Carney was appointed the next Governor of Bank of Canada.

Data released in Canada last week saw the August Purchasing Managers Index fall to 56.0 in September; August building permits were up 1.4%; the September unemployment rate fell below 6% for the first time since 1974 at 5.9%; September employment was up 51,000; and September average employee earnings were up 4.2% y/y.

Technical Outlook

Last week’s high (1) was below the 23.6% retracement of the 1.1875-0.9784 range and last week’s low (2) represented a new multi-decade low.  Upside resistance targets include the 1.0039/ 1.0137/ 1.0276/ 1.0389 levels while downside support targets include the 0.9760/ 0.9625/ 0.9540 levels.

AUD

The Australian dollar appreciated vis-à-vis the U.S. dollar last week as the Aussie tested offers around the US$ 0.9005 level and was supported around the US$ 0.8795 level. The pair gained about 95 pips last week.  Treasury chief Costello said the Aussie’s record high has positive and negative effects.

Data released last saw September manufacturing PMI fall 1.7 points to 50.7; August retail sales were up +0.7% m/m; the August trade deficit expanded to ­–A$ 1.61 billion; the September performance of services index was up 4.8 points m/m; and August building approvals were off 1.7% m/m.

Technical Outlook

Last week’s high (1) was a new multi-decade low and last week’s low (2) was above the 23.6% retracement of the 0.7015-0.9003 range.  Upside resistance targets include the 0.9015/ 0.9130/ 0.9250/ 0.9340 levels while downside support targets include the 0.8702/ 0.8587/ 0.8412/ 0.8329/ 0.8271/ 0.8130 levels.

SCHEDULE

Sunday, 7 October 2007

all times GMT

(last release in parentheses)

N/A       NZ                    September house prices (13.3% y/y)

2330     Australia           September performance of construction index (48.4)

Monday, 8 October 2007

all times GMT

(last release in parentheses)

0130     Australia           September ANZ job advertisements (0.1% m/m)

0545     CH                    September unemployment rate (2.6%)

0600     Belgium            European Central Bank President Trichet speaks

0730     Ireland              European Central Bank member Hurley speaks

0800     Finland European Central Bank member Liikanen speaks

0830     UK                    September producer price index, input (-0.5% m/m)

0830     UK                    September producer price index, input (0.6% y/y)

0830     UK                    September producer price index, output (0.1% m/m)

0830     UK                    September producer price index, output (2.5% y/y)

0830     UK                    September producer price index, core output (0.2% m/m)

0830     UK                    September producer price index, core output (2.4% y/y)

0830     UK                    August industrial production (-0.1% m/m)

0830     UK                    August industrial production (0.9% y/y)

0830     UK                    August manufacturing production (-0.3% m/m)

0830     UK                    August manufacturing production (0.8% y/y)

1000     Germany           August factory orders (-7.1% m/m)

1000     Germany           August factory orders (9.8% y/y)

2100     NZ                    Q3 NZIER GDP estimate (0.7%)

2301     UK                    September NIESR GDP estimate (0.7%)

2301     UK                    September BRC retail sales monitor

Tuesday, 9 October 2007

all times GMT

(last release in parentheses)

0130     Australia           September NAB business confidence (10)

0130     Australia           September NAB business conditions (19)

0500     Japan               September economy watchers’ survey, current (44.1)

0500     Japan               September economy watchers’ survey, outlook (46.5)

0600     Germany           August trade balance (€17.9 billion)

0600     Germany           August current account (€14.1 billion)

0830     Eurozone          European Central Bank President Trichet speaks

0830     UK                    August visible trade balance (-₤7.065 billion)

0830     UK                    August total trade balance (-₤4.425 billion)

1000     Spain                European Central Bank member Ordonez testifies

1000     Germany           August industrial production (0.1% m/m)

1000     Germany           August industrial production (4.6% y/y)

1215     Canada             September housing starts (226,500)

1730     US                    St. Louis Federal Reserve President Poole speaks

1800     US                    Federal Open Market Committee meeting minutes, 18 September

1930     US                    San Francisco Federal Reserve President Yellen speaks

2200     US                    Cleveland Federal Reserve President Pianalto speaks

Wednesday, 10 October 2007

all times GMT

(last release in parentheses)

0030     Australia           October Westpac consumer confidence (4.2%)

0130     Australia           August home loans (-4.1%)

0130     Australia           August investment lending (-6.8%)

0400     Japan               Bank of Japan Policy Board meeting

0600     Japan               September machine tool orders (12.6% y/y)

0645     France              August industrial production (1.3% m/m)

0645     France              August industrial production (2.6% y/y)

0645     France              August manufacturing production (1.5% m/m)

0645     France              August manufacturing production (2.9% y/y)

0730     Italy                  European Central Bank member Draghi speaks

0800     Italy                  August industrial production (-0.4% m/m)

0800     Italy                  August industrial production (2.4% y/y)

0930     Greece              European Central Bank member Garganas speaks

1100     US                    MBA mortgage applications (-2.7%)

1200     US                    Boston Federal Reserve President Rosengren speaks

1400     US                    August wholesale inventories (0.2%)

1430     UK                    August leading indicator index (-0.2% m/m)

1430     UK                    August coincident indicator index (0.1% m/m)

1815     Germany           European Central Bank member Starks speaks

2300     NZ                    September ANZ NZ PMI (55.7)

2301     UK                    September RICS house price balance (-1.8%)

2350     Japan               August machine orders (17.0% m/m)

2350     Japan               August machine orders (8.0% y/y)

2350     Japan               September M2+CD money supply (1.8% y/y)

2350     Japan               September broad liquidity (3.7% y/y)

2350     Japan               August current account (¥1.855 trillion)

2350     Japan               August trade balance (¥784.3 billion)

2350     Japan               September bank lending (0.5% y/y)

Thursday, 11 October 2007

all times GMT

(last release in parentheses)

N/A       Japan               Bank of Japan Policy Board interest rate decision

0030     Australia           October consumer inflation expectations (18.7%)

0130     Australia           September employment, net change (31,900)

0130     Australia           September unemployment rate (4.3%)

0600     Japan               Bank of Japan monthly report

0800     Eurozone          October European Central Bank monthly report

0800     Eurozone          Q2 GDP (0.3% q/q)

0800     Eurozone          Q2 GDP (2.5% y/y)

0900     Eurozone          European Commission GDP forecast

0915     Russia              European Central Bank President Trichet speaks

1230     Spain                European Central Bank member Gonzalez-Paramo speaks

1230     US                    Federal Reserve Governor Kroszner speaks

1230     US                    August trade balance (-US$ 59.2 billion)

1230     US                    Weekly initial jobless claims (317,000)

1230     US                    Continuing jobless claims (2.541 million)

1230     US                    September import price index (-0.3% m/m)

1230     US                    September import price index (1.9% y/y)

1230     Canada             August international merchandise trade

1230     Canada             August new housing price index (0.9% m/m)

2145     NZ                    August retail sales (0.0% m/m)

2145     NZ                    August retail sales, ex-autos (-0.2% m/m)

2350     Japan               September domestic corporate goods price index (0.0% m/m)

2350     Japan               September domestic corporate goods price index (1.9% y/y)

2350     Japan               Foreign net equities investment (¥223.4 billion)

2350     Japan               Foreign net bonds investment (-¥90.1 billion)

Friday, 12 October 2007

all times GMT

(last release in parentheses)

0430     Japan               September bankruptcies (2.9% y/y)

0500     Japan               September consumer confidence (44.1)

0640     France              September consumer price index (1.2% y/y)

0640     France              September consumer price index, harmonized (1.3% y/y)

0900     Eurozone          August industrial production (0.6% m/m)

0900     Eurozone          August industrial production (3.7% y/y)

0945     Belgium            European Central Bank member Stark speaks

1230     US                    September producer price index (-1.4% m/m)

1230     US                    September producer price index (2.2 % y/y)

1230     US                    September producer price index, ex-food and energy (0.2% m/m)

1230     US                    September producer price index, ex-food and energy (2.2% y/y)

1230     US                    September advance retail sales (0.3%)

1230     US                    September retail sales, ex-autos (-0.4%)

1310     US                    Federal Reserve Chairman Bernanke speaks

1325     US                    Dallas Federal Reserve President Fisher speaks

1400     US                    University of Michigan consumer sentiment (83.4)

1400     US                    August business inventories (0.5%)

1600     Luxembourg      European Central Bank member Mersch speaks

2200     US                    San Francisco Federal Reserve President Yellen speaks

DISCLAIMER: GCI’s Weekly Market Recap and Week Ahead is provided for informational purposes only. The information contained in these reports is gathered from reputable news sources and is not intended to be used as investment advice. GCI assumes no responsibility or liability from gains or losses incurred by the information herein contained.