European Mid Morning Update 28th January 2008
There have been no further releases from Europe and the calendar is particularly sparse today.
There is little to add but note a story suggesting that the British clearing bank, Barclays may require an injection of capital to the tune of $143bn to offset losses on security backed by bond insurers. If true it could contribute to losses on the FTSE today.
The following economic releases are due today:
Euro-zone – December
Money Supply M3 (YoY) 12.2%
U.S. – December
New Home Sales 649K
New Home Sales (MoM) +0.2%
President Bush is due to deliver his State of the Union address
The market has started the week on a mild bearish note following through on the stock market losses. However, there is little energy behind this and while there is the chance of mild new lows, Wednesday’s FOMC meeting will be a big restraining factor this week.
The market has been looking for a 50bp cut though futures have trimmed back the chances to between 25bp and 50bp. Frankly, to expect the Fed to cut by 1.25% over the course of one week is stretching the imagination.
Such a move would only lead to the market accusing the Fed of panic and we would get the Oliver Twist story all over again.
25bp is possible but if not then there’ll be no change.
While inflationary pressures are being played down the Fed still have some concern and will want to reserve the ability to cut further in the future if conditions require. Cutting too quickly would leave them short of fire power.
In addition to the FOMC decision we face the plethora of month-end releases on Thursday including the European PMI numbers, zone-wide confidence numbers and the U.S. ISM Manufacturing PMI on Friday.
Today could be mixed, but first signs suggest the potential for Dollar losses to just above 1.48 Euro and back to the 1.0806-36 Swissie area.
The Pound remains soft and should move into a sideways trading range fro the next few days while Dollar-Yen is likely to rebound as long as the 105.95 area supports.