Wake Up Call - Mar 8

Good Morning. American equity index futures are indicating a broadly higher open after strength in Asia and Europe today. As expected rate news reported by Korea, the ECB and the Bank of England, left markets at ease and free to rise today. The market is ignoring weak retail sales data for February, perhaps buying into the weather excuse most retailers are providing. In any event, psychology seems to have improved for now, and the tense environment that led to recent capital outflows looks to have calmed. We think you can expect the market to recover some of its losses in the very short term, but the systemic risks that led to this fast decline remain in place, and economic data should remain weak over the next few months. So, even though we see short short-term recovery, economic weakness threatens to pressure shares over the next few months, before economic recovery takes hold. Also, subprime lending concerns remain, and are worsening, and geopolitical risks continue to threaten.

Asia:
Hang Seng Index +1.36%; Shanghai/Shenzhen 300 +1.47%; NIKKEI 225 +1.94%; BSE SENSEX 30 +3.73%; KRX 100 +0.85%: Taiwan TAIEX Index +1.24%

U.K. & Europe:
DJ STOXX 50 Index +0.92%; FTSE 100 +0.94%; CAC 40 +0.97%; DAX +0.93%; Russian RTS Index +0.2%

KEY HEADLINE NEWS

• Retailers in aggregate seem to be reporting a generally weaker than expected month of February, and most are blaming the weather. Thomson Financial reports that of the 35 merchants that have reported February same-store sales, 24 missed expectations.
• Weekly jobless claims for the week ended March 3 came in at 328,000, slightly less than the 330,000 consensus view, as reported by Bloomberg. Claims were 10,000 less than the prior week, and continue to represent a healthy level of employment. However, we expect job reductions in the housing industry and broader American market in the months ahead.
• As expected, the European Central Bank raised interest rates by a quarter percentage point, to 3.75% in an effort to curb inflation, while the Bank of England held rates steady.
• A consensus of economists surveyed by Bloomberg sees 2.4% GDP growth this quarter, and expects growth to accelerate later in the year. This agrees with the Fed forecast, and should be reassuring to the market.

(disclosure)