which signaled further deterioration in consumer spending amid the ongoing recession as rising unemployment forced consumers to retrench their spending.

Meanwhile Asian stocks also dropped this morning, as investors worldwide are still worried that the worst might not be over, and accordingly investors are becoming risk averse, as they are selling higher yielding assets and buying the Japanese Yen and the U.S. dollar.

The U.S. dollar extended its gains against the Euro, as the pair continued to trade within the $1.32 levels and seems to be on its way down to the $1.31 levels today, meanwhile the U.S. dollar dropped against the Japanese Yen inline with our projections toward the 98 levels and seemingly the pair is targeting the 97-96 levels now.

Meanwhile Japan released earlier this morning the industrial production index for the month of February, industrial production fell by 9.4 percent inline with the prior estimate, while compared with a year earlier industrial production fell 38.4% also inline with the prior estimate.

Also capacity utilization continued to fall in February, as the ongoing recession continues to weigh down on the world’s second largest economy and continues to create increased spare capacity, where capacity utilization dropped by 11.9% following the prior reported drop of 12.9%.

The Japanese economy remains under huge pressures, as the ongoing recession continues to hammer the economy; meanwhile slowing global demand is also contributing to the ongoing recession as Japanese exports continue to fall amid the worst financial crisis since the Great Depression.

Moving on to Germany, as Europe’s largest economy is also under huge stress amid the ongoing recession, as exports continue to drop amid slowing global demand, while domestic spending is also faltering as a result of the ongoing global financial crisis, and the unemployment rate continues to rise, and that is further weighing down on economic growth.

Germany released today its wholesale price index for the month of March, wholesale prices dropped by 0.9% following the prior reported drop of 0.1% and beyond median estimates of a 0.3% drop, while compared with a year earlier wholesale prices dropped by 8.0 percent also below the prior and expected drops of 5.7% and 7.1% respectively.

The ongoing recession and low commodity prices are still weighing down on inflation in Germany and the euro zone in general, and accordingly downside risks to inflation continues to persist, however the European Central Bank is still unconcerned over deflation risks, as the ECB continues its rigid stance compared to other central banks around the world.

The ECB has been reluctant to cutting interest rates aggressively and that was clear over the last ECB meeting, where the ECB decided to cut its benchmark interest rates by 25 basis points only, while stressing that any further measures will have to wait till next meeting, as the ECB continues to assess the developments of the crisis!!!

As for the world’s largest economy, further hints on inflation will be released today, as after the producer price index signaled some alarming figures yesterday the consumer price index for the month of March will be released, the CPI is considered to be a much better gauge for inflation, since it measures prices both the services and manufacturing sectors, while the PPI excludes prices of services.

The CPI is expected to have risen by 0.1 percent in March following the prior reported rise of 0.4% in February, while CPI is expected to have dropped by an annualized 0.1% following the prior reported rise of 0.2%.

Core CPI which excludes food and energy prices is expected to have risen by 0.1% in March compared with the prior reported rise of 0.2%, while core CPI is expected to have risen by an annualized 1.7% following the prior rise of 1.8 percent.

Some members of the Federal Reserve Bank are still concerned over the outlook for inflation, as downside risks to inflation continue to persist amid the ongoing recession which continues to suppress prices, as tightened credit conditions, rising unemployment, falling stocks and declining home values are still weighing down on consumers’ spending.

The New York Empire State manufacturing index will be also released today for the month of April; the index is expected to continue contracting though on a slower pace, as the index is expected to rise to -35.00 from the prior estimate of -38.23. Also net long term TIC flows are expected to have risen in February by $14.0 billion following the prior deficit of $43.0 billion.

Industrial production is expected to have fallen in March by 0.9 percent following the prior revised drop of 1.5%, while capacity utilization is also expected to continue easing to 69.6% from the prior revised estimate of 70.2%.

Finally, the Fed will release its Beige Book, which would stress and signal the recent developments in the economy, as conditions are still worsening amid rising unemployment and further tightening in credit conditions, though the Beige Book might signal the recent upbeat data from the housing sector, which could mean that the housing sector slump might be coming to an end…