Signs of weakness all around

Economics

This week in the US the ISM business surveys for February should stabilise after recent declines, particularly on the manufacturing side.

Non-farm payrolls probably improved in February in line with lower weekly initial jobless claims. In Europe we expect Purchasing Manager Indices for February to weaken in line with recent national surveys.

The ECB should keep monetary policy unchanged, awaiting further signs of economic recovery. UK housing price indices are likely to show a gradual slowdown in the housing market. Japanese industrial production should have picked up in January.

Foreign exchange

EUR/USD: We're close to a test of resistance at 1.3310.

JPY/USD: The outlook is neutral - the dollar is trapped between resistance at 106.00 and support at 104.25.

Fixed Income

Sharp correction in the European bond market, while most of the bad news came from the US. Triggers to that bond sell-off were Greenpsan's speech and very high US PPI figures.

In Europe, CPI surprised on the downside, and also the German, Italian and Belgian business confidence surveys came out lower than expected.

Equities

The stock markets in general endured some losses in the first part of lost week as oil prices rose further and inflation fears entered the market.

Nevertheless, in the second part of the week American markets offered resistance to the depressing mood and succeeded to rise again.

Europe suffered from the new weakness in the USD and had to wait until Friday before surging again. On a sector level we saw a remarkable shift from utilities towards health care.