But data still points to further economic deterioration


  • US S&P Case-Shiller Composite 20 Home Price Index fell -18.55% y/y vs. -18.30% expected
  • US Feb Consumer Confidence at 25.0 vs. 35.0 expected and 37.7 prior
  • US House Price Index at -1.7% m/m vs. revised -2.2% prior
  • US Feb Richmond Manufacturing Index at -51 vs. -49 prior
  • US ABC Consumer Confidence at -48 vs. -49 prior
  • JP Jan Merchandise Trade Balance at –JPY952.6 bln vs. –JPY322.3 bln prior
  • AU Q4 Wage Cost Index at +1.2% q/q, +4.3% y/y vs +1.0%, +4.1% prior respectively
  • AU Q4 Construction Work Done at +1.7% vs. revised 5.5% prior
  • NZ RBNZ 2-year inflation expectations at 2.3% vs. 2.7% prior
  • JP Feb Small Business Confidence at 25.0 vs. 24.8 prior


  • German Final Q4 GDP (0700)
  • HK Q4 GDP (0830)
  • UK Prelim Q4 GDP (0930)
  • US Jan Existing Home Sales (1500)
  • US Second leg of Bernanke's testimony (1500)

Market Comments

There was one snippet of 'good' news in Bernanke's semi-annual testimony last night, and markets latched onto it like a leech. His comment that a full-blown nationalization of major US banks was off the cards was welcomed, and helped equity markets rebound in the same manner we had seen when news broke that the Citigroup stake may only be 40%. The rest of the testimony held nothing new, reiterating that currently downside risks to the economy probably outweigh those on the upside while any recovery is dependent on a return to normal in the financial system and to this end he opined that the US Treasury bank plan was the 'best hope'. He argued that a full recovery from the current recession was likely more than 2-3 years awayHe failed to deliver any new insight into the quantitative easing process that the Fed is considering and there was no additional information on the possibility of purchasing longer-dated treasuries. Nevertheless, markets were content to ride the wave of positive sentiment and wall St closed about 4% higher.

On the data front, there was very little to cheer about. US house prices continued their rapid descent in December, with the S&P/Case-Shiller index down 18.6% y/y with foreclosure activity likely adding pressure to general house-price levels. US consumer confidence was at a record low in Feb, dropping dramatically to 25 from last month's record low of 37.7, as the worsening employment situation continues to lift consumer pessimism. The survey also showed that those who saw jobs as 'hard to get' rose to 47.8% vs -41.1% in Jan while those claiming jobs were 'plentiful' fell to 4.4% from 7.1% previously. Thus the ratio of hard to get/plentiful ratio to near the 11 mark which would point to an unemployment rate of more than 8%.

There was further bad news for Japan as its trade deficit increased to a record JPY952.6 bln from JPY322.3 bln in December, the fourth straight month of deficits and unprecedented in an export-oriented economy, as exports slumped a hefty 45.7% y/y.
The data was slightly distorted by the timing of the Lunar New year celebrations which happened in January this year compared to February last year, but nevertheless the trend is apparent and hints at further cuts in production until excess inventories are cleared and the risk of increased layoffs. Looks like another nail in the coffin for the JPY.

Markets had little to latch on to from US Pres Obama's address in front of a joint session of the US Congress. The speech contained little of new substance, though he did appear to admit that repairing the US economy may cost more than the almost $1 tln committed so far, though fell short of detailing how much. The tone of the speech tended to be more upbeat than recent rhetoric, and included the rally-cry 'We will rebuild, we will recover, and the USA will emerge stronger than before'. Let's wait and see...

ECB's Weber was quoted on the wires, assuring that no Euro-zone states were threatened with bankruptcy at the moment and could see no possible scenario where the Euro-zone system would break up. Commenting on the suggestion raised recently that Germany and other Euro-zone countries could together issue a bond to aid states like Ireland and Greece, he said that this would be the wrong road to pursue, adding that common liability for individual states' finances would not be desirable and not within the constitutional framework of the EU. He reiterated that any aid for stricken countries would have strict conditions attached to ensure that each applicant would take responsibility for their fiscal policy. EUR had a bit of a wobble when the news came out but held the 1.2800 lvl and is slowly rebounding.

Asian bourses had a mixed reaction the positve close on Wall St. The Nikkei joined in the party with gains of 2.5%+ but the Australian index slid into minor negative. North Asia also hovering above the red at time of writing. This suggests that there is a risk gains may not be sustainable into the European and US sessions.


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