WEEKLY MARKET RECAP, WEEK AHEAD, AND SCHEDULE
16 March 2008

Sunday 

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€

The euro appreciated vis-à-vis the U.S. dollar last week as the single currency tested offers around the $1.5690 level and was supported around the $1.5280 level. The pair gained about 320 pips last week.  The Fed announced a new US$ 200 billion Term Securities Lending Facility where it will create a 28-day repo and provide U.S. Treasuries in exchanged for agency and mortgage-backed securities debt.  The Fed also upped its swap lines with ECB and SNB. Carlyle Capital defaulted on $16 billion in MBS trades and this hurt the dollar.  Bush verbally intervened to support the U.S. dollar. FRBNY and JPMorgan Chase bailed out Bear Stearns on Friday. Fed funds are pricing in about a 66% chance of a cumulative 125bps easing over the next two FOMC meetings.

ECB’s Trichet verbally intervened saying he is “concerned” about “present excessive” FX moves.  ECB’s Weber said upside price risks are “very high” and outweigh downside economic growth risks. Buba may upwardly revise its 2008 growth forecast. German exports are expected to top €1 trillion in 2008. Juncker verbally intervened to support the U.S. dollar and Trichet said he is “preoccupied” with disorderly FX movements.  The ECB sees Q1 GDP growth at 0.4% or below and warned on core inflation increases.

Data released in the U.S. last week saw January wholesale inventories up +0.8%; the January trade balance worsened to –US$ 58.2 billion; weekly initial jobless claims were unchanged at 353,000 with continuing jobless claims up 7,000 to 2.835 million; February retail sales were off 0.6% with the ex-autos component off 0.2%; February import prices were up 0.2% with export prices up 0.9%; the March University of Michigan consumer sentiment index fell to 70.5; and February headline and core CPI was unchanged m/m.

Data released in the eurozone last week saw the German January trade surplus rise to €17.1 billion; Germany’s March ZEW economic expectations index climbed to -32.0; EMU-15 industrial output was up 0.9% m/m and 3.8% y/y; French February HICP was unchanged at 3.2%; EMU-15 February CPI was upwardly revised to 3.3%, an all-time high; EMU-13 Q4 labour costs were up 3.5% y/y; and German February CPI was up 0.5% m/m and 2.8% y/y.

Technical Outlook

Last week’s high (1) was a new lifetime high and last week’s low (2) was above the 38.2% retracement of the 1.4438-1.5688 range.  The 1.5789/ 1.5854 levels represent upside resistance targets while the 1.5393/ 1.5219/ 1.5069/ 1.4979 levels represent downside support targets.

¥/ CNY

The yen appreciated vis-à-vis the U.S. dollar last week as the greenback tested bids around the ¥98.90 level and was capped around the ¥103.55 level.  The pair lost about 355 pips last week. The Nikkei 225 stock index lost 1.54% on Friday to close at ¥12,241.60.  The pair traded below parity for the first time since 1995.  Finance chief Nukaga verbally intervened against the yen’s strength.  BoJ Governor nominee met with stiff opposition and Fukuda may put forth a new candidate.  Economy minister Ota said the U.S. economic downturn is intensifying. EPA forecasts see Q1 GDP growth around 0.42%. BoJ Policy Board meeting minutes from 14-15 February saw downside risks to the global economy and U.S.  BoJ’s Noda said industrial production is “flattened” but doesn’t see a BoJ rate cut.

Data released in Japan this week saw the February money supply up 2.3%; February bank lending was up +0.9% y/y; the February economy watchers’ survey improved to 33.6; January private sector machinery orders surged 19.6% m/m; February machine tool orders were off 0.5% y/y; GDP accelerated between October – December, up 0.9% m/m and 3.5% y/y; the January current account surplus expanded 8.1% y/y; the February corporate goods price index was up 0.4% and 3.4% y/y; consumer sentiment worsened to 36.1 in February; January industrial output fell 2.2% m/m; and Tokyo and Osaka February condo sales fell.

In Chinese news, the Chinese yuan appreciated vis-à-vis the U.S. dollar as the greenback closed at CNY 7.0894 in the over-the-counter market, down from CNY 7.1110.  The Chinese government sees China’s labour market worsening.

Data released in China last week saw the February trade surplus printed at US$ 8.56 billion; the February producer price index was up 6.6% y/y; China’s CPI is estimated to have been 8.3% in February; February CPI was up 8.7% y/y; retail sales climbed 20.2% y/y in the January – February period; actual foreign direct investment was up 75.19% in the January – February period; January consumer confidence fell to 95.6; industrial value-added output climbed 15.4% y/y in the January-February period; and January-February urban fixed-asset investment was up 24.3% y/y.

Technical Outlook

Last week’s high (1) was below the 38.2% retracement of the 114.65-98.89 range and last week’s low (2) was a new multi-year low. Upside resistance targets remain the 102.61/ 104.91/ 105.62/ 106.77/ 108.63 levels while downside support targets remain the 98.00/ 95.04/ 94.41 levels.

₤

The British pound appreciated vis-à-vis the U.S. dollar last week as cable tested offers around the US$ 2.0395 level and was supported around the $1.9995 level.  The pair gained about 85 pips last week.  Prime Minister Brown verbally intervened on exchange rates, saying people are “concerned” about excessive volatility. 

Data released in the U.K. last week saw February PPI input prices up 1.7% m/m and 19.3% y/y; output prices rose 0.3% m/m and 5.7% y/y; January manufacturing production rose 0.4%; January industrial production fell 0.1%; BRC February high street sales were up 1.5% y/y; RICS house prices worsened in February; CML January mortgage loans were off 19% m/m; NIESR expanded in the three months to February, but below trend; January annual house price inflation fell to 8.0% from 8.4% in December; the January trade deficit was unchanged at -₤7.5 billion; and the U.K. public’s inflation expectations jumped to 3.3% for the coming year in February.

Technical Outlook

Last week’s high (1) was above the 50.0% retracement of the 2.1159-1.9336 range and last week’s low (2) was below the 38.2% retracement of the same range. Upside resistance targets include the 2.0463/ 2.0729 levels while downside support targets include the 2.0033/ 1.9910/ 1.9767/ 1.9618 levels.

CHF

The Swiss franc appreciated vis-à-vis the U.S. dollar last week as the greenback tested bids around the CHF 0.9970 level and was capped around the CHF 1.0255 level. The pair lost about 270 pips last week.  The pair fell below parity for the first time in decades. SNB kept its three-month Swiss franc Libor target rate unchanged at 2.25% to 3.25% and will continue to target 2.75%.  SNB reduced its 2008 GDP growth forecast to 1.5% and lifted its inflation forecast to 2.0%. SNB’s Hildebrand sees financial market turbulence likely to continue.

Data released in Switzerland last week saw the March economic expectations index fall to -71.7 from -55 in February.

Technical Outlook

Last week’s high (1) was around the 23.6% retracement of the 1.1594-0.9972 range and last week’s low (2) was a new multi-decade low.  Upside resistance targets include the 1.0354/ 1.0478/ 1.0691/ 1.0864/ 1.1010/ levels while downside support targets include the 0.9638/ 0.9605/ 0.9535 levels.

CAD

The Canadian dollar appreciated vis-à-vis the U.S. dollar last week as the greenback tested bids around the C$ 0.9795 level and was capped around the C$ 0.9980 level.  The pair lost about 10 pips last week. 

Data released in Canada last week saw February housing starts rise to 256,900 and the January trade surplus widened to US$ 3.2 billion.

Technical Outlook

Last week’s high (1) was just above the 38.2% retracement of the 1.0378-0.9709 range and last week’s low (2) was above the 50.0% retracement of the 0.9063-1.0378 range.  Upside resistance targets include the 0.9965/ 1.0044/ 1.0122/ 1.0220 levels while downside support targets include the 0.9752/ 0.9623/ 0.9569/ 0.9482 levels.

AUD

The Australian dollar appreciated vis-à-vis the U.S. dollar last week as the Aussie tested offers around the US$ 0.9470 level and was supported around the US$ 0.9145 level.  The pair gained about 100 pips last week. RBA injected A$ 721 million into the financial system last Wednesday. RBA Governor Stevens predicted inflation will rise above 4.0% and this fueled expectations regarding additional interest rate hikes.

Data released in Australia last week saw NAB business confidence improve to -2 in February; January housing finance was up 2.3% m/m; February ANZ job advertisements were down 2% m/m; March consumer confidence fell 9.1% to 88.6; the March leading employment indicator fell to -0.055 from a revised -0.048 in February; and the February unemployment rate fell to 4.0%.

Technical Outlook

Last week’s high (1) was above the 23.6% retracement of the 0.8511-0.9496 range and last week’s low (2) was above the 38.2% retracement of the same range.  Upside resistance targets include the 0.9399/ 0.9462/ 0.9687/ 1.0052 levels while downside support targets include the 0.9190/ 0.9060/ 0.8992/ 0.8873 levels.

SCHEDULE

Sunday, 16 March 2008

all times GMT

(last release in parentheses)

2300     NZ                    February performance of services index

2350     Japan               Tertiary industry index (-0.6% m/m)

Monday, 17 March 2008

all times GMT

(last release in parentheses)

0500     Japan               January leading economic index (30.0%)

0500     Japan               January coincident index (22.2%)

0815     CH                    January retail sales (1.2% y/y)

1000     Eurozone          Q4 employment (0.3% q/q)

1000     Eurozone          Q4 employment (1.9% y/y)

1150     Canada             European Central Bank members Weber and Noyer speaks

1230     US                    Q4 current account balance (-US$ 178.5 billion)

1230     US                    March Empire State manufacturing index (-11.7)

1230     Canada             January manufacturing shipments (-3.4% m/m)

1300     US                    January net long-term TIC flows (US$ 56.5 billion)

1300     US                    January total net TIC flows (US$ 60.4 billion)

1315     US                    February industrial production (0.1%)

1315     US                    February capacity utilization (81.5%)

1700     US                    March NAHB housing market index (20)

Tuesday, 18 March 2008

all times GMT

(last release in parentheses)

0030     Australia           Reserve Bank of Australia Board minutes

0530     Japan               February Tokyo department store sales (-1.6% y/y)

0530     Japan               February Nationwide department sales (-2.1% y/y)

0715     CH                    Q4 industrial production (10.7% y/y)

0800     Germany           Revised RWI economic growth forecast

0930     UK                    February retail price index (-0.5% m/m)

0930     UK                    February retail price index (4.1% y/y)

0930     UK                    February RPIX (3.4% y/y)

0930     UK                    February consumer price index (-0.7% m/m)

0930     UK                    February consumer price index (2.2% y/y)

0930     UK                    February core consumer price index (1.3% y/y)

1100     Canada             February consumer price index (-0.2% m/m)

1100     Canada             February consumer price index (2.2% y/y)

1100     Canada             Bank of Canada CPI, core (0.1% m/m)

1100     Canada             Bank of Canada CPI, core (1.4% y/y)

1230     US                    February producer price index (1.0% m/m)

1230     US                    February producer price index (7.4% y/y)

1230     US                    February PPI, ex-food and energy (0.4% m/m)

1230     US                    February PPI, ex-food and energy (2.3% y/y)

1230     US                    February housing starts (1.012 million)

1230     US                    February building permits (1.084 million)

1230     US                    Federal Open Market Committee meeting begins

1700     Luxembourg      European Central Bank member Mersch speaks

1815     US                    Federal Open Market Committee interest rate decision

2300     Germany           Revised IWH economic growth forecast

2330     Australia           January Westpac leading index (-0.2%)

2350     Japan               January all-industry activity index (-0.2% m/m)

Wednesday, 19 March 2008

all times GMT

(last release in parentheses)

0000     Australia           March DEWR skilled vacancies (-2.2% m/m)

0030     Australia           Q4 dwelling starts (1.3%)

0030     Australia           February balance of payments imports (6.0%)

0300     NZ                    February credit card spending (8.6% y/y)

0900     Italy                  January industrial orders (-5.4% m/m)

0900     Italy                  January industrial orders (0.5% y/y)

0900     Italy                  January industrial sales (0.0% y/y)

0930     UK                    Bank of England Monetary Policy Committee meeting minutes

0930     UK                    February claimant count rate (2.5%)

0930     UK                    February jobless claims change (-10,800)

0930     UK                    January average earnings, bonus (3.8%)

0930     UK                    January ILO unemployment rate (5.2%)

0930     UK                    January unit wage cost (1.4%)

1000     Eurozone          January trade balance (-€4.2 billion)

1000     Eurozone          January construction output (-0.6% m/m)

1000     Eurozone          January construction output (-3.3% y/y)

1040     Luxembourg      European Central Bank member Mersch speaks

1100     UK                    March CBI industrial trends

1100     US                    MBA mortgage applications (-1.9%)

1230     Canada             January wholesale sales (-2.9% m/m)

Thursday, 20 March 2008

all times GMT

(last release in parentheses)

N/A       Eurozone          February PMI, services

N/A       Eurozone          February PMI, manufacturing

0700     Germany           February producer prices (0.8% m/m)

0700     Germany           February producer prices (3.3% y/y)

0715     CH                    February trade balance (CHF 1.22 billion)

0800     France              March PMI, manufacturing (53.8)

0800     France              March PMI, services (58.2)

0815     CH                    February producer and import prices (0.5% m/m)

0815     CH                    February producer and import prices (3.7% y/y)

0830     Germany           March PMI, manufacturing (54.3)

0830     Germany           March PMI, services (52.2)

0900     Eurozone          March PMI, manufacturing (52.3)

0900     Eurozone          March PMI, services (52.3)

0930     UK                    February retail sales (0.8% m/m)

0930     UK                    February retail sales (5.6% y/y)

0930     UK                    February public sector net cash requirement (-₤22.1 billion)

0930     UK                    February public sector net borrowing (-₤14.1 billion)

0930     UK                    February M4 money supply (13.1% y/y)

0930     UK                    February M4 sterling lending (₤21.8 billion)

1230     US                    Weekly initial jobless claims (353,000)

1230     US                    Continuing jobless claims

1230     Canada             January international securities transactions

1230     Canada             February leading indicators (0.2% m/m)

1400     US                    March Philadelphia Fed index (-24)

1400     US                    February leading indicators (-0.1%)

2350     Japan               Foreign equities and bonds buying

Friday, 21 March 2008

all times GMT

(last release in parentheses)

0700     Japan               February convenience store sales (-1.6% y/y)

0745     France              February consumer spending (-1.2% m/m)

0745     France              February consumer spending (2.2% y/y)

0745     France              Q4 wages (0.3% q/q)

0830     Italy                  March consumer confidence

0900     Italy                  January retail sales (0.1% m/m)

0900     Italy                  January retail sales (-0.6% y/y)

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.