18/2/09

FTSE 100	4034.13, -100.62	Dow	7552.6, -297.81
FTSE 250	6265.71, -196.16	Nasdaq	1470.66, -63.70
FTSE All Share	2028.96, -51.64	S&P 500	789.17, -37.67
Nikkei	7534.44, -111.07	Hang Seng	13010.29, +64.89
Oil (Crude)	$34.93	Gold	$967.50
Base Rate	1%	10 Yr Gilt	3.41%
£/$	1.417	Euro/Gbp	0.889

Markets
US stocks plunged yesterday on weak economic data and fears that the government's efforts to slow the recession won't be sufficient. Following the approval of the economic stimulus bill by both chambers of commerce last week, President Obama signed into law the $787 billion package. But the signing was of no surprise to investors and did nothing to lift the markets. Furthermore the New York Empire State index, a regional manufacturing report, fell to -34.65 in February from -22.2, analysts had predicted a smaller decline or even a slight rise.

The Dow Jones dropped 297.81 points to close at 7,552.60 while the S&P 500 slips 37.67 points to end at 789.17. The Nasdaq slumped 63.70 points to finish at 1,470.66.

Car manufacturers were in focus as General Motors and Chrysler prepared to submit their survival plans, having already received $17.4 billion in government aid. General Motors slumped 12.8% during the session after which it announced the need for an additional $9.1 billion, which could rise to $16.6 billion if economic conditions deteriorate. Chrysler said it will require a further $5 billion.

Financials retreated again after Moody's Investors Service said banks could be hit by the recession in Eastern Europe. Both JPMorgan Chase and Citigroup fell 12.3% while Bank of America dropped 12%.Wal-Mart was the only riser on the Dow following its quarterly results. The world's largest retailer reported profit that beat analysts’ estimates, sending shares 3.7% higher. Although the company did say first quarter earnings would fall short of forecasts.

US light crude oil for March delivery slid $2.58 to $34.93 a barrel. COMEX gold for April delivery jumped $25.30 to $967.50 an ounce. Treasury prices surged higher, lowering the yield on the 10 year note to 2.65% from 2.89%.

The Nikkei lost 111.07 points to close at 7,534.44 this morning. Sony Corp capped its longest losing streak for 15 months following the manufacturing report in the US. Inpex Corp, Japan's top oil explorer, slipped 2.8% after crude prices dropped.

The Hang Seng gained 64.89 points to close at 13,010.29. Stocks rallied late in the session having spent most of the day in negative territory. The bounce came after the city's chief executive said the government will take further steps to alleviate the financial crisis if "major stress" is seen in banking, business or employment.

The FTSE 100 is currently 18.77 points higher at 4,052.90. Liberty International leads the risers up 3.2% followed by ICAP which gains 2.4%. Hammerson and Schroders top the faller’s board, down 5.2% and 3.1% respectively, after going ex-dividend. Standard Chartered loses 2.5% after ING started coverage on the stock with a rating of "Sell". Aviva loses 0.4% after Cazenove cut its rating on the company to "In Line" from "Outperform".

Economics

Bank of

England

minutes (Feb) 09.30 gmt

Minutes that follow the publication of the Quarterly Inflation Report tend not to gain as much attention, since the Committee's views have already been laid out in some detail. However, the current IR stated, 'there is a range of views among the Committee of both the central projection and the balance of risks'. HSBC's best guess is that Blanchflower and at least one other member, either Gieve or Bean, would have voted for a 100bp rate cut, with the other seven members opting for a 50bp rate cut.

UK CBI industrial trends (Feb)11.00 bst

A number of indicators of global demand stabilised in January, albeit at historic lows. So this index is expected to remain weak in February.

US Import price index (Jan)13.30 gmt

After falling sharply for the previous five months, spot oil prices rose around 2 percent in January. Farmer food prices have also stopped falling over the past month. Overall ex-petroleum import prices are expected to continue to drift lower with a 0.5 percent drop in January. Given higher oil, the total import price index could fall 0.3 percent, with the year on year rate dropping to -10.6 percent from -9.3 percent.

US Housing starts (Jan) 13.30 gmt

Housing starts and building permits have each declined by over 75 percent since their respective peaks in January 2006 and September 2005. However, new home sales have also fallen by more than 70 percent over this period, partly reflecting increased competition from distressed sellers of foreclosed existing homes for sales. The month's supply of new homes for sale rose to an all time high (going back to 1963) of 12.9 months in December. This overhang is likely to further constrain new construction activity. Both housing starts and building permits are expected to fall to 520,000 in January.

US Industrial production (Jan) 14.15 gmt

Industrial production is expected to fall 2 percent in January, the same decline as in December. Capacity utilization could fall to 72 percent from 73.6 percent, which would be the lowest reading since 1983. We know that manufacturing aggregate hours worked fell 2.1 percent, with declines in a wide array of industries. Preliminary data suggests that auto production was especially weak, and a 12 percent fall in this category is expected, probably the largest drop since 1998. The ISM production index rose to 32.1 from 26.3 in January, but this is still consistent with a significant pullback in activity.

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