however, the rising charge-offs for uncollectible loans instilled fear among investors that banksâ€™ balance sheets will remain under pressure amid the worst financial crisis since the Great Depression.
Meanwhile commodity prices especially oil prices dropped heavily yesterday approaching the $48 a barrel levels, as speculations mounted over the prospects of slowing global demand amid the ongoing recession.
Germany released early this morning the producer price index for the month of March, PPI fell by 0.7% following the prior estimate of 0.5% and well below median estimates of a 0.3% drop, while compared with a year earlier PPI declined by 0.5% also below the prior and expected rise of 0.9% and 0.1% respectively.
Downside risks to inflation continue to persist, as prices of oil remain subdued and as the ongoing recession continue to suppress prices, the European Central Bank however seems to be unfazed by those risks and is rather confident that the 16-nation economy is undergoing a phase of disinflation rather than deflation.
Deflation risks has been increasing over the last few months amid the ongoing recession, as expectations of slowing global demand continued to weigh down on prices, while slowing domestic demand also contributed to the continuous drop in prices.
The ECB has stressed that itâ€™s still open to more rate cuts, however the ECB has been rather rigid in dealing with the developments of the worst financial crisis since early 1930s, as the ECB has been rather cautious as they eased their monetary policy, while other central banks have been taking rather aggressive easing, while the ECB failed so far to follow the lead of other central banks including the Federal Reserve Bank and the Bank of England in quantitative easing.
Germany will also release the ZEW confidence survey for the month of April, the economic sentiment index is expected to rise to 2.0 from the prior estimate of -3.5, while the current situation index is expected to drop to -90.0 from -89.4, and the economic sentiment index for the euro zone is expected to be flat following the prior estimate of -6.5.
Moving on to Europeâ€™s second largest economy, the U.K. will release today the consumer price index for the month of March, CPI is expected to have risen by 0.2% following the prior reported rise of 0.9%, while compared with a year earlier CPI is expected t have risen by 2.9% down from the prior reported rise of 3.2% and that would mean that inflation would probably drop below the governmentâ€™s upper target for inflation. Core CPI on the other hand is expected to have risen by 1.5% down from the prior reported rise of 1.6%.
The U.K. will also release further hints on inflation, as the retail price index for the month of March is expected to have dropped by 0.2% following the prior reported rise of 0.6%, while compared with a year earlier RPI is expected to have dropped by 0.5% following the prior flat estimate. RPI that exclude mortgage installment payments is expected to have risen by 2.2% down from the prior rise of 2.5%.
Downside risks to inflation continue to persist as well in the United Kingdom, as the ongoing recession has taken its toll on the economy, though the huge depreciation of the pound over the last few months has been able to ease those downside risks and indeed helped the U.K. economy in avoiding deflation.
The Bank of England has been slashing its benchmark interest rates heavily over the last few months, as rates are now at a record low of 0.50 percent, meanwhile the BOE started to purchase long term gilts in a bid to reduce long term interest rates and accordingly help revive lending and economic growth as well.
Moving across the Atlantic, as with the absence of the United States from todayâ€™s economic calendar, Canada will release the wholesales index for the month pf February, the index is expected to rise by 1.0% up from the prior reported drop of 4.2%.
Meanwhile the Bank of Canada will announce its benchmark rate decision, the BOC are expected to maintain its benchmark interest rate at 0.50 percent, as the economy is still under huge pressures from the ongoing global financial crisis, while economic activity remains rather subdued.
Slowing global demand especially from the United States has taken its toll on the Canadian economy, since the United States is Canadaâ€™s largest trading partner and accordingly economic activity is highly dependant in Canada on the performance of the U.S. economy, not to mention the interrelated nature of the two economies.
As for the United States, more companies will continue to announce their first quarter results and accordingly we should expect more fluctuations in equity markets over the upcoming period, as investors are yet to figure out the effects of the ongoing recession on companiesâ€™ earnings, since the outlook is still rather unclear.
Companies continued to layoff workers over the course of the recession, however over the last few months companies increased the pace of layoffs as conditions deteriorated further, meanwhile expectations are still signaling that the outlook will continue to be challenging for companies over the course of this year at leastâ€¦