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European Mid Morning Update

Releases from Europe:

There are no further economic releases due today:

While Asia has chosen not to follow-through on Friday’s sudden recovery in the Dollar the numbers that have been released today have produced a quite consistent implication of how the global crisis is generating negative impact on all countries.

On the face of it the numbers can be described as expected. Australia’s Q1 PPI numbers were almost double forecast, the Japanese Tertiary Index declining much more than forecast and U.K. house prices now generating warnings that the ‘housing market is in danger of being taken to unreasonable extremes if the freezing of mortgage liquidity continues.’

With a rising number of houses left unsold and the average period of being on the market rising to 85 days the impact is a wilting confidence by U.K. consumers who are also finding their monthly budget squeezed by higher food and oil prices.

The problem generated by lenders which no longer want to lend is forcing the BOE to work closely with the Treasury to provide a solution to improve liquidity in the mortgage market by allowing banks to swap their mortgage debts for government securities.

On the face of it the scheme appears to be a valid way of providing liquidity. However, it does underline the continued seriousness of the underlying crisis.

All of this undermines consumer confidence and this is becoming a major preoccupation of the financial authorities.

All central banks have maintained an upbeat message of a limited timeline to the crisis. The Europeans remain upbeat, the States maintains a forecast of a more buoyant H2 and the Japanese cabinet and BOJ maintain that growth will return.

However, since the crisis began eight months ago all have been forced to downgrade their projections as figures keep proving them wrong.

Inflation is not going to go away until oil prices return to levels that make growing crops for bio-chemicals less attractive. OPEC appears steadfast in its intention to place the rest of the world under the same fuel price crisis as seen in the 1970’s. That pushed inflation into double digits.

And the common factor in all of this is the consumer, wherever they may be. If they lose confidence, shaken by falling asset prices and possible negative equity in their properties, by higher food and energy prices that force them to reduce their spending the entire situation takes a further step down the road to global recession.

That’s not just a Dollar problem - that will also hit other major currencies also… No wonder the central banks have this major preoccupation with consumer boosting comments…

Note important support and resistance areas:

Ian Copsey
Global Forex Trading
http://www.gftforex.com

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Tesco has announced an annual profit of £2.846bn, an 11.8% increase for 2007. Although Tesco admit prices had risen by around 1.5% across the board, the increase on food prices masked price cuts on non-food items.

Tesco has stood strong as the UK high street has suffered as households have been hit by higher mortgage costs, fuel prices and food bills.

International sale were up a staggering 25.3% and Tesco say that half of its trading profit now comes from its overseas stores. All this amidst analysts being concerned about the group’s performance in the US. But the supermarket chain have claimed to be encouraged by the first 60 stores figures, and plans to open a further 150 stores this year.