WEEKLY MARKET RECAP, WEEK AHEAD, AND SCHEDULE
26 October 2008

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 $1.2495 level and was capped around the $1.3345 level. The pair lost about 790 pips last week.  The Bush administration is pursuing a global leaders’ summit.  The Fed created a new liquidity provision program called the Money Market Investor Funding Facility to purchase commercial paper.  Bernanke supports a new fiscal stimulus and sees gloom in the U.S. economy.  Minneapolis Fed’s Stern sees 1-3 years of weak growth. The FOMC is likely to cut rates this week. The US$ 300 billion Hope for Homeowners package is nearly ready.

Germany implemented strict conditions for the disbursement of its €500 billion rescue package. ECB’s Stark sees “very flat growth in 2009.” ECB’s Tumpel-Gugerell sees GDP and inflation forecast revisions in December. ECB’s Draghi sees “negative signals for the next few quarters.”  The ECB will likely have to lower rates further. French banks are seeking €5 billion from the French government.

Data released in the U.S. last week saw the Chicago Fed’s National Activity index fall to -2.57; September existing home sales climbed 5.5% to a 5.18 million annualized rate; weekly initial jobless claims were up 15,000 to 478,000 with continuing claims off 6,000; and the August house price index fell 0.6%.

Data released in the eurozone last week saw Italian business sentiment at 15-year lows; German manufacturing PMI tumbled; and EMU-15 manufacturing PMI fell to 43.3; EMU-15 August new industrial orders fell; and the EMU-15 current account deficit expanded to -€8.4 billion.

Technical Outlook

¥/ CNY

The yen appreciated vis-à-vis the U.S. dollar last week as the greenback tested bids around the ¥90.90 level and was capped around the ¥102.40 level.  The pair lost about 735 pips last week. The Nikkei 225 stock index lost 9.60% on Friday to close at ¥7,649.08.  BoJ reduced its economic assessment, citing “sluggish” growth and “weaker export growth.” The government also reduced its economic assessment.  BoJ’s Shirakawa noted “tensions are heightening” and saw “downside risks.” The government is pursuing an additional ¥2 trillion income tax cut. BoJ DG nominee Yamaguchi espoused central bank independence.  The pair reached its lowest level since 1995. Aso called the yen’s moves “rapid” and finance boss Nakagawa said global authorities are watching the moves.

Data released in Japan last week saw the August all-industries index fell 1.8% m/m and September exports growth fell to 1.5% y/y.

The Chinese yuan depreciated vis-à-vis the U.S. dollar as the greenback closed at CNY 6.8433 in the over-the-counter market, up from CNY 6.8340.

Data released in China saw Q3 GDP up 9.0% y/y; September CPI was up 4.6% y/y; September retail sales were up 23.2% y/y; September industrial value-added output was up 11.4% y/y; and the September property climate index fell.

Technical Outlook

₤

The British pound depreciared vis-à-vis the U.S. dollar last week as cable tested bids around the US$ 1.5260 level and was capped around the $1.7515 level.  The pair lost about 1,360 pips last week.  BoE allocated more funds via US$ auctions. Barclays priced a ₤1 billion note.  BRC sees U.K. manufacturers slashing 60,000 jobs by the end of the year.  BoE’s King said the U.K. economy is probably in a recession and sees inflation falling below target in two years.  MPC members voted 9-0 this month to cut by 50bps. NIESR sees the U.K. economy off 0.9% in 2009.  BoE’s Bean said the financial crisis is the worst in history. MPC could slash rates by 50bps in November and MPC’s Sentance was dovish.  MPC’s Barker warned it could be months before conditions improve.

Data released in the U.K. last week saw public sector net debt up significantly in the half-year to September; Rightmove October house prices were off 4.9% y/y; Q3 GDP was off 0.5% q/q; September retail sales were off 0.4% m/m and up 1.8% y/y; and September BBA mortgage approvals were off 56.6% y/y.

Technical Outlook

CHF

The Swiss franc depreciated vis-à-vis the U.S. dollar last week as the greenback tested offers around the CHF 1.1750 level and was supported around the CHF 1.1320 level. The pair gained about 285 pips last week.  SNB implemented a €10 billion euro-Swiss franc swap facility. SNB has been unable to get 3-month franc LIBOR back to 2.50%.

Data released in Switzerland last week saw the September trade surplus stable at CHF 1.44 billion.

Technical Outlook

CAD

The Canadian dollar depreciated vis-à-vis the U.S. dollar last week as the greenback tested offers around the C$ 1.1995 level and was supported around the C$ 1.1305 level.  The pair gained about 950 pips last week.  The government is considering banks’ loans.  BoC cut rates by 25bps to 2.25% and said rates may need to fall further.  BoC sees 2008 and 2009 economic growth of 0.6% both years. Finance minister Flaherty said the government will guarantee borrowing by banks.

Data released in Canada last week saw September wholesale sales off 1.5%; September leading indicators fell 0.2% with ex-autos off 0.3%; September CPI was up 0.1% m/m and 3.4% y/y; and core inflation was up 0.4% m/m and 1.7% y/y.

Technical Outlook

AUD

The Australian dollar depreciated vis-à-vis the U.S. dollar last week as the Aussie tested bids around the US$ 0.6045 level and was capped around the US$ 0.7060 level.  The pair lost about 675 pips last week.  The media reported the RBA may not cut rates as aggressively as previously thought. The government may up its guarantee on bank deposits. Treasurer Swan said inflation has peaked.

Data released in Australia last week saw Q2 wage deals up 0.3% q/q; September imports were up 14%; Q3 final PPI was up 2.0% q/q; and core inflation reached a 17-year peak.

Technical Outlook

SCHEDULE

Sunday, 26 October 2008

all times GMT

(last release in parentheses)

2350     Japan                September corporate service prices (1.4% y/y)

Monday, 27 October 2008

all times GMT

(last release in parentheses)

N/A       Japan                October small business confidence (40.2)

N/A       UK                    October Nationwide house prices (-1.7% m/m)

N/A       UK                    October Nationwide house prices (-12.4% y/y)

0900     Eurozone          September M3 money supply (9.2%)

0900     Eurozone          September M3 money supply (8.8% y/y)

0900     Germany           October Ifo, business climate (92.9)

0900     Germany           October Ifo, current assessment (99.8)

0900     Germany           October Ifo, expectations (86.5)

1400     US                    September new home sales (460,000)

1400     US                    September new home sales (-11.5% m/m)

2350     Japan                September retail trade (0.7% m/m)

2350     Japan                September retail trade (0.7% y/y)

2350     Japan                September large retailers’ sales (-2.2%)

Tuesday, 28 October 2008

all times GMT

(last release in parentheses)

N/A       Japan                October PMI, manufacturing (44.3)

0030     Australia           Q3 NAB business confidence (-8)

0710     Germany           November GfK consumer confidence (1.8)

0745     France              October consumer confidence (-44.0)

0745     France              September housing starts (13.1%)

0745     France              September housing permits (-19.6%)

0830     Italy                  October retailers’ confidence (111)

0830     Italy                  October services survey (-2)

0900     Italy                  September hourly wages (4.2% y/y)

0900     CH                    September UBS consumption indicator (1.618)

1100     UK                    October CBI distributive trades report

1200     US                    Former Federal Reserve Chairman Volcker speaks

1300     US                    August S&P. Case-Shiller home prices

1400     US                    October consumer confidence (59.8)

1400     US                    October Richmond Fed manufacturing index (-18)

1400     US                    Treasury Secretary Paulson speaks

2145     NZ                    September trade balance (-NZ$ 750 million)

2350     Japan                September industrial production (-3.5% m/m)

2350     Japan                September industrial production (-6.9% y/y)

Wednesday, 29 October 2008

all times GMT

(last release in parentheses)

N/A       Germany           October consumer price index (-0.1% m/m)

N/A       Germany           October consumer price index (2.9% y/y)

N/A       Germany           October CPI, harmonized (-0.1% m/m)

N/A       Germany           October CPI, harmonized (3.0% y/y)

0000     Australia           October DEWR skilled vacancies (-3.5% m/m)

0930     UK                    September net consumer credit (₤1.2 billion)

0930     UK                    September net lending secured on dwellings (₤100 million)

0930     UK                    September mortgage approvals (32,000)

0930     UK                    September M4 money supply (1.4% m/m)

0930     UK                    September M4 money supply (12.2% y/y)

1100     US                    MBA mortgage applications

1230     US                    September durable goods orders (-4.8%)

1230     US                    September durable goods orders, ex-transportation (-3.3%)

1300     US                    Federal Open Market Committee meeting

1555     US                    Former Federal Reserve Chairman Volcker speaks

1815     US                    Federal Open Market Committee interest rate decision

2145     NZ                    September building permits (-7.9% m/m)

2230     Australia           Reserve Bank of Australia Deputy Governor Battelino speaks

2300     Australia           August leading index (0.0%)

2350     Japan                Japanese purchases of foreign equities and bonds

2350     Japan                Foreign purchases of Japanese equities and bonds

Thursday, 30 October 2008

all times GMT

(last release in parentheses)

N/A       Japan                Bank of Japan Policy Board meeting minutes

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

N/A       Germany           September retail sales (3.1% m/m)

N/A       Germany           September retail sales (-3.0% y/y)

0200     NZ                    October NBNZ business confidence (1.6)

0200     NZ                    September M3 money supply (7.2% y/y)

0600     Germany           September ILO unemployment rate (7.2%)

0745     France              September producer prices (-0.5% m/m)

0745     France              September producer prices (6.9% y/y)

0855     Germany           October unemployment change (-29,000)

0900     Italy                  October PMI, retail

0900     France              October PMI, retail

0900     Germany           October PMI, retail

0900     Eurozone          October PMI, retail

1000     Eurozone          October business climate indicator (-0.79)

1000     Eurozone          October consumer confidence (-19)

1000     Eurozone          October economic confidence (87.7)

1000     Eurozone          October industrial confidence (-12)

1000     Eurozone          October services confidence (0)

1230     US                    Q3 GDP, annualized (2.8% q/q)

1230     US                    Q3 GDP price index (1.1%)

1230     US                    Q3 personal consumption expenditure, core (2.2% q/q)

1230     US                    Weekly initial jobless claims (478,000)

1230     US                    Continuing jobless claims (3.720 million)

1230     Canada             September industrial product prices (-0.2% m/m)

1230     Canada             September raw materials prices (-7.7% m/m)

1915     US                    San Francisco Fed President Yellen speaks

2330     Japan                October Tokyo CPI (1.4% y/y)

2330     Japan                October Tokyo CPI, ex-food and energy (0.5% y/y)

2330     Japan                September CPI, national (2.1% y/y)

2330     Japan                September CPI, ex-food and energy (0.0% y/y)

2330     Japan                September jobless rate (4.2%)

2330     Japan                September household spending (-4.0% y/y)

Friday, 31 October 2008

all times GMT

(last release in parentheses)

0000     Japan                Bank of Japan Policy Board meeting

0001     UK                    October GfK consumer confidence (-32)

0030     Australia           September private sector credit (0.5% m/m)

0030     Australia           September private sector credit (10.5% y/y)

0030     Australia           Reserve Bank of Australia Assistant Governor Debelle speaks

0100     Australia           September HIA new home sales (-1.3% m/m)

0500     Japan                September housing starts (53.6% y/y)

0500     Japan                September housing starts, annualized (1.130 million)

0500     Japan                September construction orders (-0.3% y/y)

0600     Japan                Bank of Japan semi-annual economic outlook report

0900     Italy                  September producer price index (-0.2% m/m)

0900     Italy                  September producer price index (8.2% y/y)

1000     Eurozone          October consumer price index estimate (3.6% y/y)

1000     Eurozone          September unemployment rate (7.5%)

1030     CH                    October KOF leading indicator (0.62)

1230     US                    September personal consumption expenditures, core (0.2% m/m)

1230     US                    September personal consumption expenditures, core (2.6% y/y)

1230     US                    September personal consumption expenditures (4.5% y/y)

1230     US                    September personal income (0.5%)

1230     US                    September personal spending (0.0%)

1230     US                    Q3 employment cost index (0.7%)

1230     Canada             August gross domestic product (0.7% m/m)

1345     US                    October Chicago PMI (56.7)

1400     US                    October University of Michigan consumer sentiment (57.5)

1800     US                    Federal Reserve Chairman Bernanke 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.

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