Global stocks continue to rebound on positive news from the banking sectors. Barclay said that id had a strong start to 2009 following similar announcement from Citigroup, Deutsche Bank and Bank of America earlier. The bank also said that it's in talks to sale the shares of ETF Unit iShares. Barclay's stocks rose as much as 15 percent in London while FTSE is gaining nearly 2% in early session. Other major indices in Europe are up more than 2% while US stock futures also follows strength in Europe and climbs. Dollar and yen, on the other hand, is sold off heavily on improved risk appetite.
Also, the greenback is pressured as markets are speculating that Fed may start to buy treasuries after the FOMC meeting this week. While there has been talk of treasuries purchases from Bernanke for a while, BoE has indeed walked the talk last week, buying Gilts. Yield on 10-year UK government bonds fell to 2.94% to a 12 year low. Markets perceive the actions and results from BoE as a example for Fed to examine the effectiveness of quantitative easing. In a television interview, Bernanke said that the biggest risk to economic recovery is a shortage of political will and recovery is not going to happen until the financial markets and banks are stabilized.
Technically speaking, dollar index dives through mentioned 86.81 cluster support (23.6% retracement of 77.69 to 89.62 at 86.80) and reached as low as 86.56 so far. Further decline could now be seen to key support of 83.58 cluster support (50% retracement of 77.69 to 89.62 at 86.65). We're expecting downside to be contained above there to bring resumption of rise from 77.69. Meanwhile, on the upside, break of 87.76 resistance is needed to be the first signal of bottoming. Otherwise, short term risk remains on the downside.
Also, note that EUR/USD's break of 1.2991 resistance confirmed that a short term bottom is at least in place at 1.2456. Further rise should now be seen to challenge 1.3329 cluster resistance (38.2% retracement of 1.4719 to 1.2456 at 1.3320). On the downside, break of 1.2848 is needed to be the first signal of topping. Otherwise, short term risk remains on the upside.
On the data front, Eurozone Feb HICP was confirmed at 0.4% mom and 1.7% yoy. UK Rightmove house prices rose +0.9% mom, the second monthly consecutive gain March after increasing +1.2% a month ago. On annual basis, the index decline -9% following a -9.1% drop in February. According to BOE's quarterly bulletin, UK's residential mortgage-backed bond markets remained closed as overall liquidity condition is still tight.
Looking ahead, US industrial production should have fallen for the 4 consecutive month in February (Consensus: -1.2%, January: -1.8%) as weak labor report indicated weak factory activities, while capacity utilization have plunged to 71.1% from 72% a month ago. Empire State manufacturing index should have recovered to -32 in March from a record low of -34.7% a month ago. Long term TIC flow in January is expected to have improved further to $45B from $24.4B, suggesting strong foreign appetite for U.S. financial assets. Concerning the property market, the NAHB housing market index likely remained at 9 in February as the previous month. In Canada, capacity utilization probably slid to 75.7% in 4Q08 from 77.4% in the previous quarter.