Euro Zone Economic Confidence Falls to Record Lows in March

According to the Commission report, economic sentiment in the euro zone fell to a record low 64.6 in March, despite expectations of a mild improvement to 65.4 from February’s 65.3 level. Furthermore, February’s figure was revised down from an initial estimate of 65.4.

The weakness in morale was widespread, the Commission said. Consumer confidence fell to -34 from the previous month’s -33 level as expected, while sentiment in the industrial sector worsened to -38 in March, down two points from February’s figure. Economists had expected no change to the reading.

Services sentiment also lost ground, falling to -25 for the month, down from both the -24 reading expected and recorded previously. Meanwhile, February’s figure was revised down from -23.

The Commission also reported that its business climate index deteriorated beyond expectations to -3.58, its lowest level since January 1985. Forecasts had suggested a more modest fall to -3.48 from February’s -3.4, revised up from an initial estimate of -3.51.

The euro is currently trading down 0.83% at 1.318 USD.

European Market Recap: European Bonds Mixed, Equities Lower

- Eurostoxx down -0.57%
- FTSE 100 down -0.07%
- Euro down 1.36 cents to 1.339 USD
- Pound Sterling down 1.55 cents to 1.4298 USD
- Yields on German Ten Year Bunds down 3.7 bps to 3.09%
- Yields on UK Ten Year Gilts down 1.7 bps to 3.29%

The German ten-year Bund was up 37.0 ticks to 123.45 with yields down 3.7 bps to 3.09%, while the 10-year gilt was down 10.0 ticks to 121.64 with yields down 1.7 bps to 3.29%.

The five-year Bobl was up 35.0 ticks to 116.05, the two-year Schatz up 15.5 ticks to 108.07 and the September 2009 Euribor contract trading up 4.5 ticks to 98.63.

The spread between the 10-year Bund and 10-year U.S. Treasury notes widened 2.409 bps to -36.70.

UK 30-year bond yields were down 0.4 bps to 4.26%, five-year bond yields were down 0.7 bps to 2.48%, while yields on the two-year bond were up 0.6 bps to 1.29%.

The September 2009 Short Sterling contract was down 2.0 ticks to 98.44.

Yields on U.S. 10-year Treasury notes were down 1.3 bps to 2.726%.

European stock markets were declining with the Eurostoxx down 10.57 points to 1833.14, the UK FTSE 100 down 2.74 points to 3922.46 and the German DAX down 23.99 points to 4235.38.

The Japanese Nikkei was trading down 9.36 points to 8626.97.

The Canadian dollar was down 0.38 cents to 0.8088 against the USD (1.2364 USD/CAD). Against the euro, the loonie was up 0.33 cents to 0.6040 (1.6556 CAD/EUR).

The U.S. dollar was down 0.69 to 98.03 and the euro was down 2.24 to 131.27, both against the yen.

The euro was down 1.36 cents to 1.339 while the pound sterling was down 1.55 cents to 1.4298, both against the USD.

The euro was up 0.08 cents to 0.9366 pounds.

The Swiss franc was down 1.18 cents to 1.1389 against the USD and down 0.07 cents to 1.5253 against the euro.

IMF’s Strauss-Kahn Calls for Further Action to Combat Global Economic Crisis

The current global economic crisis could lead to millions falling back into poverty, raising the risk of unrest and even war, Strauss-Kahn said while speaking at the International Labour Organization in Geneva on Monday.

Strauss-Khan also urged more states to reduce both tax rates and spending, adding that monetary policy has “reached its limit”.

The IMF chief added that an economic recovery is possible for next year, but that it will depend “on what policy is implemented”.

Furthermore, Strauss-Kahn said that while current stimulus measures are “not bad”, some countries have room for more. Current fiscal stimulus so far lies between 1.6% and 1.7% of global GDP, down from the 2% level required by the Fund.

Midday Market Recap: Markets Poised for Flurry of Activity at Expiration

Stocks Mixed Ahead of Options and Futures Expiration

Stocks are searching for direction on Friday ahead of a derivatives expiration that is expected to generate huge trading volumes.

The S&P 500 was most recently down 0.3 points to 784, while the Dow Jones Industrial Average is higher by 16 points to 7,417.

Financials are among the laggards, with Bank of America shares lower by 9% and those of J.P. Morgan Chase down by 3%.

The relative stability in equity markets is a surprise considering Friday is a ‘quadruple witching’ day: one of the four days a year when stock index futures, stock index options, stock options and single stock futures expire simultaneously. Market watchers expect a surge of activity at the end of the session, when the contracts expire.

Dennis Gartman warned investors to beware of sudden movements. “We shall see some rather great, perhaps even titanic battles, fought as the options traders on the floors try to get stocks and indices to close at or near ‘Big Figure’ for the expiry. We shall try our best to stay out of the way, for as elephants play, the mice come under assault,” he wrote in Friday’s Gartman Letter.

Commodity options and futures also expire on Friday and that has the potential to rattle the commodity-driven Canadian stock market. So far, commodity prices have been relatively stable with oil lower by 8 cents to $51.98 per barrel and gold down $4 to $955 per troy ounce.

The S&P/TSX was most recently higher by 3 points to 8,704. The index has so far made gains in eight consecutive sessions.

“If U.S. equities are unable to get back above water today, the TSX will be vulnerable to catch-up selling as it still closed Thursday with a gain, but this is not going to be a day for aggressive bets either way,” said Andrew Pyle, wealth advisor at ScotiaMcLeod. “It’s better to wait for the dust to clear.”

In Europe, the Euro Stoxx 50 closed up 2 points to 1,766, the UK FTSE 100 up 26 points to 3,843 and the German DAX up 25 points to 4,069.

Meanwhile, on the week, the Stoxx 50 gained 2%, the FTSE 100 gained 2.4% and the DAX climbed 2.9%.

Euro Falls Sharply as Positive Sentiment Weakens

A pause in the rally in global equities is helping to drag down the single currency against the U.S. dollar after three days of massive gains. Despite Friday’s one-cent drop, however, the euro remains near 3-month highs.

The Asian session was relatively quiet for EUR/USD, which traded within a tight range. Japanese markets were closed for the vernal equinox. During the European session, the cross managed a modest rally, hitting highs at 1.3726 USD. However, the euro dropped sharply just ahead of the North American session and was most recently lower by 0.0108 to 1.3558.

Weaker European data is hurting the momentum of the euro, according to some currency strategists. Euro zone industrial production fell at its sharpest pace on record to kick off the year, Eurostat reported on Friday. On an annual basis, production fell 17.3%, which was much lower than the consensus call for a drop of 15.5%.

In more European news, EU leaders agreed to double the amount of aid allowed to non-euro zone members. According to media reports, the members are also closer to an agreement on a €5 billion stimulus plan.

With no data expected to be released in the U.S., currency strategist are expecting equities and market sentiment to dominate currency markets

Brian Dolan, chief currency strategist from Gain Capital, said it is only a matter of time before market sentiment once again supports the U.S. dollar. He added that concerns over the European economy will limit major gains

Currency strategists from Brown Brothers Harriman said today’s bounce in the U.S. dollar is nothing more than a technical correction. They are looking for more greenback weakness during the North American session.

“Look for North American players to take advantage of the dollar’s bounce to sell it,” they said. “The market wants to push the dollar lower.”

Elsewhere in foreign exchange, the Canadian dollar is up 0.0002 to 0.8072 against the U.S. dollar (1.2388 USD/CAD) and up 1.04 to 77.32 against the yen.

The U.S. dollar is up 1.27 to 95.80 against the yen and the Dollar Index is up 0.531 to 83.660.

The pound sterling is down 0.0043 to 1.4461 against the U.S. dollar and down 0.0066 to 1.7917 against the Canadian dollar.

Commodity and Treasury Markets Quiet

After two days of volatile trading, commodity and Treasury markets are quiet.

WTI crude oil is up $0.08 to $52.12 and gold at the Chicago Board of Trade is down $5.90 to $953.70 per ounce. The front month contracts expire at the close on Friday.

U.S. two-year yields are flat at 0.86%, with five-year yields flat at 1.65%, 10-year yields up 2.0 bps to 2.62% and 30-year yields up 1.0 bps to 3.64%. The Eurodollar September 09 contract is down 2.0 ticks to 98.77. The yield curve is steeper, with the 10/2-year spread up 2.1 bps to 176.27 bps.

Yields on two-year Canadian government bonds are up 1.2 bps to 1.00%, with five-year yields up 1.3 bps to 1.73%, 10-year yields up 2.0 bps to 2.72% and 30-year yields up 1.6 bps to 3.58%. The September 09 BAX contract is flat at 99.48.

In Germany, returns on two-year government bonds are down 6.6 bps to 1.33%, with five-year yields down 5.2 bps to 2.22%, 10-year yields down 6.0 bps to 2.99% and 30-year yields down 4.7 bps to 3.88%.

Yields on UK two-year bonds are down 5.1 bps to 1.34%, with five-year yields down 2.1 bps to 2.24%, 10-year yields down 1.4 bps to 3.02% and 30-year yields down 2.7 bps to 4.07%.

German Investor Sentiment Rises for Fifth Consecutive Month

In a press release issued on Tuesday, the ZEW reported that investor sentiment rise to a reading of -3.5 in March, despite expectations of a fall back to -8.0 from -5.8 in February.

While the improvement from February to March has slowed compared to previous month, the impression remains that investors are becoming more hopeful regarding the German economic outlook in six-months time, the ZEW said.

“According to the financial market experts, the economic slowdown is gradually phasing out,” ZEW President Dr. Wolfgang Franz said. “The bottom of the recession is likely to be reached this summer.”

Sentiment towards the current situation also surprised to the upside, falling only to -89.4 from February’s -86.2. Economists had forecast a more pronounced decline to -90.0.

Despite the continued deterioration in the current situation component, Franz also noted that “there are first signs of hope, which should “not be played down”.

Meanwhile, euro zone investor confidence also unexpectedly improved in March, rising to a reading of -6.5 from -8.7 previously. Economists had forecast a fall back to -12.0 for the month.

U.S. Preview: Retail Sales to Suffer as Jobless, Fearful Americans Tighten Belts (Repeat)

“Headwinds are amazingly strong against the consumer with an increasing unemployment rate that drove consumer confidence down to a new all-time low in February,” said Ellen Beeson Zentner, economist with Bank of Tokyo-Mitsubishi UFJ.

Economists expect February retail sales to drop 0.5%, against the 1.0% gain reported in January. Sales ex-autos are expected to fall 0.1% against a 0.9% increase the month prior. The Bank of Tokyo-Mitsubishi is expecting sales excluding autos and gas to gain 0.4% for the month.

January’s jump in headline sales was a surprise, especially considering the preceding six months all saw negative reads - a trend not seen since the inception of the report.

Stephen Gallo, strategist with Schneider Foreign Exchange, said the boost reflected sharp post-holiday discounting, as well as the effects of low petrol prices throughout the fourth quarter, which attracted consumer spending.

“We don’t expect any of these positive effects to have persisted in February,” he said. Gallo is forecasting a 1.1% month-over-month drop.

Several consumer-related reports released in the United States indicate February saw Americans avoiding the lure of shopping malls.

The International Council of Shopping Centers, for instance, reported U.S. chain store sales dropped 0.1% in the month.

Meanwhile, the Conference Board’s consumer confidence index fell to a record low that month, the average price for a gallon of gas climbed around 4 cents, and the U.S. economy lost 651,000 jobs.

Thursday’s report will reveal “the true misery of the U.S. household sector, battered by falling wages growth, falling employment and employment prospects, falling house prices and the falling value of investments, and a need to repair balance sheets,” said Rob Carnell, economist with ING.

More optimistically, Joe LaVorgna, economist with Deutsche Bank Securities, said he thinks the worst is over for retail sales in the United States, although a recovery is still a few months off. He said the particularly staggering drops in retail sales over the course of this recession can be linked to consumer inaccessibility to credit.

“This highlights the critical need for the rapid implementation and aggressive use of policies, such as the TALF [Term Asset Backed Securities Loan Facility], aimed at revitalizing the consumer credit markets,” he said.

The U.S. government’s TALF will spend up to $1 trillion to support consumer and business loans.

Australian Job Advertisements Plummet in February, Says ANZ

This amounts to a weekly average of 161,583 ads per week, according to ANZ Economics and Markets Research on Monday (Sunday night EDT.) In January, there were 180,349 ads.

Newspaper ads saw a decrease of 25.2%, to 8,524 from 11,391 in January.

Internet job ads fell 9.4% to 153,059 from 168,959 in January, ANZ reported.

Weak U.S. Employment Supports Gold Prices

Gold prices remained at elevated levels throughout the North American trading session. Although U.S. equities closed relatively flat on the day CBOT spot price remain in the middle of its range trading just below $940 an ounce.

According to some commodity strategists another weak reading in U.S. nonfarm payrolls helped to keep prices near its weekly highs. The U.S. economy shed 651,000 jobs in February, the fourth month in a row that job losses have been more than half-a-million. The unemployment rate rose five-tenths to 8.1%, the highest rate since December 1983, against expectations for a 7.9% rate.

Mike Glaser, futures broker at LaSalle Futures said he is expecting the weakening economy to continue to support prices. He said if prices can hold the $940 it would be a very bullish sign that prices are moving higher. A break through $960 could lead to another test of $1,000 he added.

Analysts from Citigroup are also bearish on gold prices, especially as equities continue to fall. They pointed that both stocks and houses are both in a major bear market. They wrote in a research note that the S&P 500 could fall to 360 and gold prices could rise to $2,000.

“We are seeing both major asset markets falling together for the first time since the early 1980’s,” they said. “Credit remains unavailable and chaos resumes. The only currency that is being used as a real safe haven is gold which we believe can continue to shine both in a deflationary and inflationary environment.”

UK DATA: FEBRUARY PMI CONSTRUCTION AT 27.8 LEVEL

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European Market Recap: European Bonds Fall, Equities Lower

The five-year Bobl was down 7.0 ticks to 117.28, the two-year Schatz up 1.0 ticks to 108.41 and the September 2009 Euribor contract trading up 1.0 tick 98.49.

The spread between the 10-year Bund and 10-year U.S. Treasury notes widened 5.955 bps to -11.10.

UK 30-year bond yields were up 1.9 bps to 4.31%, five-year bond yields were down 3.0 bps to 2.52%, while yields on the two-year bond were down 3.5 bps to 1.33%.

The September 2009 Short Sterling contract was flat at 98.27.

Yields on U.S. 10-year Treasury notes were up 7.3 bps to 2.936%.

European stock markets were declining with the Eurostoxx down 6.87 points to 1663.97, the UK FTSE 100 down 36.86 points to 3588.97 and the German DAX down 27.01 points to 3683.06.

The Japanese Nikkei was trading down 50.43 points to 7229.72.

The Canadian dollar was up 0.31 cents to 0.7763 against the USD (1.2883 USD/CAD). Against the euro, the loonie was up 0.01 cents to 0.6148 (1.6265 CAD/EUR).

The U.S. dollar was up 0.15 to 97.60 and the euro was up 0.66 to 123.23, both against the yen.

The euro was up 0.48 cents to 1.2626 while the pound sterling was up 0.36 cents to 1.4091, both against the USD.

The euro was up 0.11 cents to 0.8961 pounds.

The Swiss franc was up 0.29 cents to 1.1725 against the USD and down 0.17 cents to 1.4804 against the euro.

All data were taken at 5:12 a.m. EST.

Generated by CEP Newswires

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Citigroup shares have now plummeted all the way to $1.50. Oh, how the mighty have fallen. As recently as April 2008, there was a high of $29.89 and as much as $56.28 in 2007 when Citi was the largest financial services company in the world. But C is now down -$55/share on 5.5 billion shares, losing roughly -97.7% of market value, causing the single biggest loss of wealth in world history. And if it wasn’t for the US government (ie, taxpayer) stepping in, there might even be a movie called the Lost Citi - or as some of us would like to have the script written, the Last Citi.

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