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Apr-27-2008

Germany leads drop in euro zone business sentiment

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'After a brief brightening at the beginning of the year, the survey results indicate a slower pace of business activity,' said Ifo chief Hans-Werner Sinn. (More...)
LONDON, April 24 (Reuters) - European stocks extended losses on Thursday while the euro fell broadly after a survey showing German corporate morale deteriorated more than expected in April raised concerns about the euro zone economy. (More...)
A rampant inflation rate hit the ZEW's economic expectations index, which plummeted to minus 40.7 points from minus 32.0 points in March. (More...)
Analysts had predicted that the Ifo would slide to 104.3 in April. (More...)
Eastern Europe? Well, yes. (More...)
Producer prices rose less than 4.2% growth in February and 3.7% expected by economists. (More...)
The French and German business surveys released Thursday also indicated that the strong euro had so far not emerged as a critical issue for industry. (More...)
"After a brief brightening at the beginning of the year, the survey results indicate a slower pace of business activity," Ifo's Hans-Werner Sinn said. (More...)
We are still in the rate of the 50s, so we are still alarmed,''' Secretary General Philippe de Buck said. (More...)
The German IFO index weakened to 102.4 in April from 104.8 the previous month which was significantly below expectations. (More...)
The Euro fell nearly 100 points on the news from 1.5835 to 1.5739 before finding support. (More...)
In Britain there is a clear distinction between what is happening in the housing market and what is happening to the real economy. (More...)
Orders for goods meant to last for at least three years unexpectedly fell in March, according to a report released by the Department of Commerce on Thursday, although the decrease was largely due to a decrease in orders for transportation equipment. (More...)
We're "not heading toward a marked slowdown, but more of a moderation in growth,'' Kai Wildfoerster, a fund manager at Pacific Investment Management Co. in Munich, said before Ifo's report. (More...)
There was particular concern among analysts about the state of the retail sector. (More...)

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'After a brief brightening at the beginning of the year, the survey results indicate a slower pace of business activity,' said Ifo chief Hans-Werner Sinn. 'The retarding forces evident since mid-2007 have gained strength again,' with the euro's climb this week to an all-time high of more than 1.60 dollars helping to spark renewed worries about the impart of the strong currency on Europe's export machine. Underscoring industry concerns about rising inflation, oil prices hit a record just short of 120 dollars a barrel in the build up to the release of the Ifo survey this week. While the decline in the Ifo adds to expectations of a slackening European economy this year, the index's unexpected fall will add to the pressure on the European Central Bank to begin paving the way for a rate cut this year to shore up growth in the face of the economic uncertainty triggered by the U.S. subprime mortgage market crisis. With inflation in the 15-member eurozone having leapt to a record high of 3.6 per cent last month, the ECB has up until now insisted that fighting inflation remained its first priority and as a consequence it was in no rush to trim borrowing costs in the currency bloc. [1] The reports reinforced concern that the fastest inflation in 16 years is curbing purchasing power and also preventing the European Central Bank (ECB) from lowering interest rates. With the euro's 9% gain against the dollar this year threatening exports and the U.S. housing slump pushing up credit costs worldwide, the International Monetary Fund (IMF) this month cut its growth forecast for Europe. The euro-region economy will expand by just 1.4% this year after 2.6% growth last year, the Washington-based IMF said on April 9. That would be the slowest expansion since 2003.[2]

While business confidence in the 15-member eurozone's largest economy, Germany slumped more than forecast in April, the mood among industry leaders in the currency's bloc second biggest economy, France dropped to a 16-month low this month amid signs of an increasingly brittle economic mood in Europe. 'After a brief brightening at the beginning of the year, the survey results indicate a slower pace of business activity,' said Ifo chief Hans-Werner Sinn releasing his institute's latest survey of 7,000 German executives, as a result adding to the pressure on the European Central Bank to begin paving the way for a rate cut. 'The retarding forces evident since mid-2007 have gained strength again,' with the euro's climb this week to an all-time high of more than 1.60 dollars helping to spark renewed worries about the impart of the strong currency on Europe's key export machine.[3] The stronger-than-expected deterioration in corporate sentiment in Germany and France, the euro zone's two biggest economies, reflected an abrupt downturn in sentiment across the broader common currency area. In Germany, the Ifo economic institute said on Thursday its business climate index hit its lowest level since January 2006, dropping to 102.4 from 104.8 in March and falling below all forecasts in a Reuters poll of 52 economists ECONDE. In France, which together with Germany accounts for roughly half the euro zone's economic output, business sentiment fell to its lowest level in nearly 1-1/2 years in April. "The euro zone economy is coming under stress, particularly the more resilient part of the euro zone," said Bank of America economist Matthew Sharratt, adding that the European Central Bank could moderate its tough tone after the data.[4] "The euro-zone economy is coming under stress, particularly the more resilient part of the euro zone," said Matthew Sharratt, a Bank of America economist. In Germany, the Ifo economic institute said that its business climate index fell to its lowest level since January 2006, dropping to 102.4 from 104.8 in March and falling below all forecasts in a Reuters poll of 52 economists. In France, which together with Germany accounts for roughly half the 15-nation euro-areas economic output, business sentiment fell to its lowest level in nearly 18 months in April, according to the French statistics office Insee. In further evidence of weakness across the region, Dutch business confidence fell in April to its lowest level since the end of 2005, while consumer confidence also slipped. In Belgium, business morale suffered its biggest ever monthly drop.[5]

Business confidence in Germany and France - two of Europe's biggest economies - sank in April, as a record high euro hurt exports, and soaring crude and food prices fueled inflation. The Munich-based Ifo institute said its business climate index, based on a survey of 7,000 executives, fell to 102.4 from 104.8 in March. That's the lowest since January 2006, when the index stood at 101.8 points, and well below the 104.3 forecast of economists. In France, sentiment among 4,000 manufacturers slid to 106 from 108, its lowest level since January 2007.[2]

April 24 (Bloomberg) -- German business confidence dropped to the lowest in more than two years in April as record oil prices and faster inflation dimmed the outlook for growth in Europe's largest economy. The Munich-based Ifo institute said its business climate index, based on a survey of 7,000 executives, fell to 102.4 from 104.8 in March. That's the lowest since January 2006.[6] April 24 (Bloomberg) -- Business confidence in Germany and France, which account for about half the euro-region economy, slumped in April as record oil and food prices stoked inflation. The Munich-based Ifo institute said its business climate index, based on a survey of 7,000 executives, fell to 102.4 from 104.8 in March. That's the lowest since January 2006.[7]

Now the weak reading from Germany - widely seen as the euro zone's economic engine - has cemented concerns that high oil prices and the strong euro are clouding the euro area's business climate, jolting the currency lower. Germany's widely-watched Ifo business confidence index hit its lowest level since January 2006, at 102.4 in April, from 104.8 in March. That's significantly lower than the 104.3 level that economists had expected.[8] Managers assessment of their current economic situation also fell for the first time in three months. That subindex decreased to 108.4 points from 111.5. "The Ifo business climate index fully erased its modest first-quarter gains during April, as a dampening impact of the global financial market turbulences on manufacturing and non-financial services sectors is finally being felt," said Timo Klein, senior economist at Global Insight. In neighboring France, a separate report showed that French manufacturers confidence in April was down from a revised 108 points in March to 106 points this month, its lowest level since January 2007.[9]

'We expect the (German) business climate index will continue to fall,' said Commerzbank economist Matthias Rubisch as the strong euro as well as rising food and energy prices undercut growth in the nation. The German business sector's assessment both of the country's current economic situation and its economic outlook six months down the track fell in April, as a result dragging down the overall index. While the Ifo index component gauging the current situation eased from 111.5 points in March to 108.4 this month.[1] 'We expect the business climate will continue to fall,' said Commerzbank economist Matthias Rubisch as the strong euro as well as rising food and energy prices undercutting economic growth. Concerns about the economic fallout from renewed inflationary pressures, the strong euro and contracting global economic growth also resulted in an unexpected fall in investor confidence in Germany, the ZEW index released this month showed. A survey released this week by the Royal Bank of Scotland gauging the mood in Europe's manufacturing sector dropped more than expected.[3] The business climate index in the retail sector also fell with the threat of resurgent inflation helping to cancel hopes that higher wages and falling unemployment could encourage private consumption in Germany. Concerns about the economic fallout from renewed inflationary pressures, the strong euro and contracting global economic growth also resulted in an unexpected fall in investor confidence in Germany, the ZEW index released this month showed.[1]

LONDON, April 24 (Reuters) - European stocks extended losses on Thursday while the euro fell broadly after a survey showing German corporate morale deteriorated more than expected in April raised concerns about the euro zone economy. The Ifo Institute's German business climate index fell to 102.4 in April, its lowest since January 2006, from 104.8 a month ago, against a forecast for a drop to 104.3. [10] LONDON, April 24 (Reuters) - The euro slid further from this week's record high versus the dollar on Thursday after the biggest monthly fall in German business sentiment since September 2001 dented confidence in the euro zone economy. The headline Ifo business morale index fell to 102.4 in April, its lowest since January 2006, undershooting expectations of an easing to 104.3, while the current conditions component came in at 108.4 compared with a consensus forecast of 111.0.[11]

LONDON (Thomson Financial) - European government bonds got a shot in the arm after a key survey of confidence in the area's biggest economy signalled a worrying slowdown. The German Ifo research institute said its April business climate index fell to 102.4 from 104.8 in March, well below analysts' forecasts of a more modest decline to 104.3.[12]

"The Ifo survey is again consistent with the story of the effects of the euro and the wider slowdown," said David Owen, analyst with Dresdner Kleinwort. He told Forbes.com that although German exports had held up well so far, other warning signs were apparent; Belgium's business confidence indicator for April fell to minus 7.9 on Wednesday, from a positive figure of 1.2, in March. The euro's record strength has led to criticism of the European Central Bank, with new Italian premier Silvio Berlusconi blasting the central bank's hawkish policy earlier this week. It also pushed European Aeronautic Defense and Space (other-otc: EADSF - news - people ) to raise dollar-denominated prices at its Airbus subsidiary, in a bid to better resist the greenback's weakness against the euro.[13] The euro fell to a one-week low versus the dollar after the Ifo data. In further evidence of weakness across the region, Dutch business confidence fell in April to its lowest level since the end of 2005, while consumer confidence also slipped. In Belgium, business morale suffered its biggest ever monthly drop. "I dont think there is going to be any enthusiasm for going into this should we have a rate hike? debate," Sharratt said. "I think this data will certainly put a cap on that." A European Central Bank Governing Council member, Michael Bonello, said Thursday that it was hard to make a case for higher interest rates although he qualified the remark by saying his comments were not intended to reflect the views of all the Council.[14] The Ifo, coupled with a slump in euro zone manufacturing PMI to near contraction levels on Wednesday, suggested that the euro zone may not be immune to a U.S.-led economic slowdown. The data poured cold water on nascent market expectations of a European Central Bank interest rate hike this year, which had been born out of continued hawkish rhetoric from inflation-focussed European Central Bank policymakers. "One of the reasons that euro has been so strong over the past couple of months is the fact that German manufacturing confidence had been very strong, and hadn't really been vulnerable to the slowdown elsewhere, particularly in the U.S. This is probably the first sign we've had that there's been a weakening," said Adarsh Sinha, currency strategist at Barclays Capital. "It came in much weaker than expected and the euro's taken a hit on the back of that. If anyone was punting on a rate hike sometime this year from the ECB, the Ifo would have certainly reduced the chances, but in my view the chances were never that great anyway."[11] Disappointing German business confidence data Thursday pushed euro lower against a range of other major currencies as markets saw the 15 euro-zone economies losing momentum, reducing inflation risk. More of the same news would dash chances that the European Central Bank will raise interest rates, and add to expectations of a rate cut later this year.[8]

Asked about how the government's prediction of slower inflation next year will affect the European Central Bank, Glos said the Frankfurt-based bank has so far exercised a monetary policy which is very much geared toward price stability and it has done a "good" job delivering price stability. "There is no point speculating whether an interest rate hike would have been possible if the U.S. hadn't done the opposite for good reasons and the ECB didn't have to ensure that a rate hike wouldn't lead to a further exchange rate movement" which might have pushed up the euro further and hurt German exports, Glos said, adding that he doesn't want to speculate about the ECB's future interest rate policy.[15] The ECB's inflation rate stood at 3.6 percent in the year to March, way ahead of the central bank's target of around 2 percent. That stoked market talk that the ECB's next interest rate move may actually be up, prompting a sharp retreat in European issues, particularly at the front- end. Noyer told the Wall Street Journal that his comment was taken out of context, with the newspaper reporting him as saying 'I would never engage in a discussion about the future path of interest rates, simply because nobody knows. In the UK, gilts were also up, but by much smaller margins after news that retail sales fell at their fastest pace in more than a year in March.[12]

Policy makers including Germany's Axel Weber and Juergen Stark have suggested the ECB's current benchmark rate of 4 percent may not be high enough to combat inflation, which accelerated to 3.6 percent in March. The BDI industry federation, representing companies such Siemens AG, Europe's largest engineering company, said April 21 the German economy will expand about 2 percent this year after 2.5 percent growth in 2007. The IMF is more pessimistic, predicting growth will slow to just 1.4 percent this year. The BGA exporters association yesterday reiterated its forecast for 5 percent growth in German sales abroad in 2008 even after the euro reached $1.60 for the first time.[6] "Overall, German manufacturers are not yet feeling any spill-over effects from the U.S. crisis.'' The BDI industry federation, representing companies such Siemens AG, Europe's largest engineering company, said April 21 the German economy, Europe's largest, will expand about 2 percent this year after 2.5 percent growth in 2007. The BGA exporters association yesterday reiterated its forecast for 5 percent growth in German sales abroad in 2008 even after the euro reached $1.60 for the first time. "It's remarkable how robust the German economy is,'' BGA President Anton Boerner said.[7]

The German economy may lose momentum as record food and oil prices sap the spending power of companies and consumers. The euro's 9 percent ascent against the dollar this year is also threatening to curb export growth. With the U.S. housing recession pushing up the cost of credit worldwide, the International Monetary Fund on April 9 cut its German growth forecast for 2008.[6]

Oil prices shot up to a record high just short of 120 dollars a barrel. High energy and food prices are casting doubts on hopes that European private consumption will gain ground this year and consequently help to offset any fall in trade resulting from contracting global growth and the strong euro. Business confidence in Belgium, which is considered by economists to be a key European indicator because of the nation's close economic links across the eurozone, chalked up its biggest fall in about 28 years, the nation's central bank said Wednesday.[3] The evidence of weak business confidence in what is viewed to be the euro zone's most robust economy comes on the back of Wednesday's weak PMI survey of the manufacturing sector, and a disappointing performance recently in the retail sector. Should the German economy continue to falter, the European Central Bank may soon have to review its current hawkish stance, especially given that there have already been signs of declines in the rest of the euro zone. 'If this last bastion is about to fall, the ECB could run out of arguments for its hawkishness,' said Brzeski.[12] EUR/USD fell Wednesday on the combination of a weak flash manufacturing PMI and Belgian Business Confidence survey, and Europe picks up the rate some two cents of Tuesday's all-time high of 1.6020. The focus Thursday is again on data, with the German Ifo report out at 0800 GMT. Royal Bank of Scotland says this has become the most important indicator to watch in respect to the ECB. The bank looks for the expectations component to decline again, while the leading indicator shows some resilience.[16]

Berlin dpa) - German business confidence fell sharply in April, a key survey released Thursday showed, as concerns grew about the impact on Europe's biggest economy of surging oil prices and a soaring euro.[17] The news from Ifo is the latest in a string of recent surveys which show business confidence weakening across Europe, particularly in the manufacturing sector as it increasingly struggles to cope with a strong euro, record oil prices and easing global demand.[18]

The Ifo institutes index fell to 102.4 points in April from 104.8 points in March, reflecting concern about the record-setting euro and soaring oil prices. It was the lowest reading since January 2006, when the index stood at 101.8 points, and well below the 104.3 forecast of economists surveyed by Dow Jones Newswires. "The surveyed companies have assessed their current situation clearly more unfavorably than in the previous month. With regard to the outlook for the coming six months they are more skeptical than in March," Ifo president Hans-Werner Sinn said in a statement.[9] The business climate index dipped to 102.4 in April from 104.8 in March, and was lower than the reading of 104.3 expected by economists. The euro continued to back away from a record high against the dollar and reached its lowest level in 11 days. Thursday morning, the Department of Commerce released its report on new home sales in the month of March, showing that sales of new one-family houses fell by much more than economists had been expecting.[19] In overnight news, Germany's Ifo business climate indicator fell to 102.4 in April following March's reading of 104.8, according to data from the Ifo Institute for Economic Research. This is the lowest level in the Ifo Business Climate Index since January 2006.[20] The Ifo business climate index fell to 102.4 in April from 104.8 in March and stood well below the expected level of 104.3. The indicator deteriorated for the first time in four months and reached its lowest level since January 2006.[19]

"The decline of the Ifo index should wake up all 'decoupling' believers who over the last months advocated that the German economy had been able to shrug off the financial crisis and the U.S. slowdown," said ING economist Carsten Brzeski. French business sentiment fell to its lowest level in nearly 1.5 years, also worse than expected.[21] The ING economist Carsten Brzeski said that hopes of a "decoupling" whereby the German economy was thought able to shrug off the financial crisis and the U.S. slowdown, were unrealistic. The business confidence index from the French statistics office INSEE fell to its lowest level since December 2006.[14]

The business assessment index, which covers current conditions, dropped 108.4 points from 111.5 last month. For its monthly survey, Ifo polls 7,000 companies about their assessment of current business and their expectations for the next six months. It is considered the most reliable barometer of the current state of the German economy and its outlook. Germany had proved surprisingly resilient against the slowdown in the U.S. economy this year but the survey results released today indicated that executives are increasingly gloomy about their prospects.[22] The index is considered the most reliable barometer of the current state of the German economy and its outlook. The news this week that the value of the euro, a catalyst for the current slump, hit a new high of US$1.6018 on Tuesday, prompted business leaders to call the European single currency's surge "alarming."[18]

Bonello, also a member of the ECB's Governing Council, added that anchoring inflation was the ECB's priority and that the ECB was committed to preventing second-round inflation effects. Speaking at a news conference in Berlin, German Economy Minister Michael Glos said that the German economy is doing well and is expected to grow 1.7% this year, slowing to 1.2% in 2009, according to government forecasts. The German government is forecasting the euro to fall to about $1.56 this year, rising $1.58 in 2009.[23] "Exports will no doubt be hit by the stronger euro and weaker economic performance throughout western Europe, and domestic demand is being eroded by high energy and food prices." Germany's Economy Minister Michael Glos unveiled the government's economic growth forecast for next year, indicating the rate of expansion would decline to 1.2 percent in 2009 from 1.7 percent this year. Germany's six leading economic institutes said in a report last week that they expected growth in 2009 of 1.4 percent.[18] The deterioration in economic and financial conditions in the U.S. 'will have direct consequences' for the Canadian economy, the report says, including fading export markets and higher credit costs. Canadian GDP is now projected to grow by only 1.4% in 2008, down from the 1.8% growth foreseen when the Bank of Canada released its previous monetary update in January, and 2.4% in 2009, down from the January forecast of +2.8%. "The downward revisions to both growth and inflation leave open the strong possibility that further interest rate cuts are in the offing,' noted Paul Ferley, assistant chief economist from RBC Capital Markets. He said cuts may not be imminent, but are likely to be more dependent on greater downside risks to growth emerging from either weakening economic data or a deterioration in financial markets.[20] Economists have significantly scaled back expectations of an interest rate cut from the European Central Bank in light of high inflation rates and hawkish comments from ECB governors. They now expect the ECB, which has kept its key policy rate at 4% throughout the financial market crisis, to trim rates toward year-end.[24] A sharp slowdown in Europe will damp inflation and force the European Central Bank to cut interest rates within six months, the IMF's European Director, Michael Deppler, said in an interview on April 21.[6]

An analyst at Capital Economics, Jennifer McKeown, held out the prospect that the gloom might prompt the European Central Bank to lower interest rates. "The headline business climate index is still well above its long-run average of 96.5, suggesting that the slowdown in economic activity should not be too sharp," she said in an interview with the AFP news agency.[18] The reading will fuel fears that the euro zone economy will not be able to escape the fallout from the U.S. slowdown and boost expectations that the European Central Bank will have to start cutting interest rates in the coming months.[25] The single European currency fell to $1.575, from $1.588, during midday trading in Europe on Thursday. Although the euro smashed the $1.60 barrier for the first time this week--propped up by the European Central Bank's threat of even higher interest rates --new worries over the strength of the Eurozone economy seemed to dent faith in the currency's rise.[13]

The euro's rise may not last if the European Central Bank has to cut interest rates to spur growth.[13] None of the European Central Bank's policy-makers believe that inflation pressures are high enough to warrant interest rate increases, Central Bank of Malta Governor Michael Bonello said on Thursday.[20]

Meanwhile rising energy and food prices also remain a concern, with Germany's annual inflation rate hitting 3.1 percent in March, well above the European Central Bank's target of below 2.0 percent.[18] Speaking alongside Governing Council members at the fourth European Central Bank Conference on Statistics Thursday, ECB President Jean-Claude Trichet said inflation expectations could be skewed due to high food and oil prices, adding that the harmonized consumer price index gives an objective view of price increases.[20] Last month's rise in inflation pushed consumer prices further away from the ECB's 2 per cent annual target. Signs of a less confident economic mood emerging in Europe's key economies could force the ECB to change its tone in the coming months and to begin considering following the world's other major central banks, notably the U.S. Federal Reserve along the path towards lower borrowing costs.[3]

French inflation jumped to a 12-year high of 3.5 per cent last month with consumer prices in Germany accelerating to more than 3 per cent. Eurozone economic growth is expected to slip to well below 2 per cent this year after the currency bloc's economy expanded by 2.6 per cent in 2007. With eurozone inflation having leapt to a record high of 3.6 per cent last month, the ECB has up until now insisted that fighting inflation remained its first priority and as a consequence was in no rush to trim borrowing costs in the currency bloc.[3] Germany looks like being a clear winner. Not only is it unencumbered by a mass of housing debt, but the structure of its export industries and its close economic ties with the fast-growing Eastern Europe will see it gaining ground within the EU. It will grow faster than France and much faster than Italy this year and quite possibly next too. Another message is that since there is still reasonably strong demand for German goods, the world economy must be growing reasonably strongly too. You could almost say that this is not a global downturn at all; it is a developed-world downturn, hitting some parts harder than others. It is certainly far from a universal phenomenon. What about the duration of this downturn? Assuming there is no sudden drop in growth in China, always possible but not in sight at the moment, the key factor will be how long it takes for the set of complicated adjustments to happen in the hardest-hit economies.[26] BERLIN (Dow Jones)--German export growth will slow this year and next because of a weaker global economy and a stronger euro, which has reached a level that isn't easy to accommodate, German Economics Minister Michael Glos said Thursday.[15]

The German economy has been one of the success stories of the last year with exports booming despite the strong euro, but if things are about to get difficult, then the forecast for 1.8 percent growth in the EU for 2008 will have to come down.[27] "There's every reason for growth to deteriorate.'' The euro-region economy will expand just 1.4 percent this year after 2.6 percent growth last year, the Washington-based IMF said April 9. That would be the slowest expansion since 2003. The euro fell to $1.5748 at 1:40 p.m. in Frankfurt from $1.58.47 this morning.[7]

The 15-nation currency hit an all-time high of $1.6018 on Tuesday, the latest in a string of records. In a separate report later Thursday, the German government said it was holding its national economic growth forecast at 1.7 percent this year -- maintaining its January prediction.[28] The government forecasts real export growth of 5.1% for 2008, after 7.8% growth in 2007, and a 4.5% increase in 2009. This forecast is lower than the 5.8% export growth predicted in January. It's spring forecast is based on the assumption that the euro will trade on average at $1.56 this year and $1.58 in 2009, Glos said. Glos said Germany might still be able to defend its title as the world's largest exporter of goods this year.[15]

You could conclude that companies that have collectively made Germany the world's largest exporter are reasonably hopeful about the future of the global economy. Note that this is nearly nine months after the banking crisis broke and comes despite a euro at $1.60 and an oil price nudging $120 a barrel. This is not economists writing their opinions; it is real business executives reporting their views about demand for the goods and services they are producing. This is Germany and Germany is not Europe.[26] The Ifo economist Klaus Abberger said companies expected the global financial crisis to hit the real economy. "Negative forces from the high oil price, the euro and the financial crisis are starting to have an effect," he said.[14]

There was also poor news from France and Italy. The German Ifo index, based on a monthly poll of around 7,000 firms, fell to its lowest level since January 2006, depressed by the high oil price, strong euro and financial market turmoil.[21] And, while new orders for long-lasting U.S. manufactured goods also fell in March, a key gauge of corporate investment appetite in the durable goods report exceede expectations. For details, see. In Europe, the headline Ifo index, a measure of German business morale, fell to a much lower-than-expected 102.4 in April, its lowest since January 2006.[29]

German corporate sentiment fell more than expected in April as firms' assessment of both current economic conditions and the business outlook deteriorated, a closely watched survey showed on Thursday. The Munich-based Ifo economic research institute said its business climate index, based on a monthly poll of around 7,000 firms, fell to 102.4 from 104.8 in March.[30] What is happening? The April Ifo business survey - the monthly health check on German industry from the Ifo Institute for Economic Research based in Munich, which came out last week, shows that the general view was that it demonstrated a cooling of the business climate, and indeed it did. The euro fell back from its peak on the news. What seems to me more interesting is that the companies' assessment of the position now is so much stronger than their expectations for the future.[26]

Thursday, April 24, 2008 10:37:07 AM - European news flow gained steam on Thursday, with several nations releasing reports, the most important ones being the German Ifo business climate and UK retail sales data.[19]

In the latest batch of bad news for European growth, already nervous because of the spreading global financial crisis, the Munich-based economic research institute Ifo's monthly business climate index dropped to 102.4 points in April.[18] The Ifo business climate index fell to 102.4 from 104.8 March, well below economists forecasts of 104.3.[24] The Munich-based IFO research institute revealed today that the German business climate index fell to 102.4 in April from 104.8 in March.[31] The German IFO business climate index fell to 102.4 in April, worse than the 104.3 reading expected, and a decline from a prior 104.8.[32]

In Germany, Europe's biggest economy, the Ifo business-climate index fell to 102.4 in April from 104.8 in March, the steepest drop in the survey since September 2001. French business sentiment also fell sharply this month as companies said they expected lower production and fewer orders.[33] Confidence among German businesses fell in April following three consecutive months of increases, according to the Ifo Institute's influential survey. Its index, which is based on a monthly poll of about 7,000 firms, fell more than expected to 102.4 from March's figure of 104.8.[34]

German business confidence has fallen to its lowest level in more than two years, and dropped further than economists expected after a three-month run of increases, a closely watched survey showed Thursday.[28] Economists were looking for a reading of 108 for the month. Germany's Ifo Institute's survey of business confidence showed that Germany's business confidence plunged to its lowest level since January 2006.[19]

The euro dropped to a one-week low versus the dollar after the Ifo data. In further evidence of weakness across the region, Dutch business confidence fell in April to its lowest level since the end of 2005, while consumer confidence also slipped. In Belgium, business morale suffered its biggest ever monthly drop. Continued.[4]

I certainly don't think so, but it sure looks as though that could be the case given how the single unit has tumbled since reaching that level on Tuesday. There were lots of reasons for the euro's decline yesterday But the infamous straw for the euro seemed to be the German Business Confidence report as measured by the think tank, IFO, this morning.[35] LONDON - The euro took a hit on Thursday, after a slip in German business confidence was interpreted as an early warning sign for the European economy as a whole.[13] German business confidence posted a steeper-than-expected decline in April, a closely watched survey shows today, pointing to new pessimism in Europe's biggest economy.[22]

Demand for the euro slid after a reading on German business sentiment showed the biggest monthly fall since September 2001, denting confidence in the euro zone economy.[29] Business confidence in France, the second largest euro zone economy, also fell more than expected in April.[36]

USA and the expensive oil destroy the European economy RBC Daily comments.In Germany the index IFO, that reflects the mood of the biggest companies in the country, fell on Wednesday. This important indicator comes up to the apprehension of the analysis's that the economy countries from the Euro zone are not immune against the crisis in the USA.[37] With signs that the euro zone's largest economy is slowing, and the outlook for growth in the rest of the single currency zone looking less than rosy, inflationary pressures should eventually ease, in turn becoming less of an issue for the ECB. 'The euro zone economy looks like it's going to slow markedly year-on-year and that should create medium-term disinflationary pressures, which should offset the inflationary pressures coming from oil and commodities at the moment,' said Page. European bonds were already higher ahead of the Ifo survey after the Bank of France's Christian Noyer 'clarified' some remarks he had made previously to give them a slightly less hawkish gloss.[12] "The euro-zone economy is coming under stress, particularly the more resilient part of the euro zone," said Matthew Sharratt, a Bank of America economist. He added that the ECB could moderate its tough tone after the data.[14]

Policy makers including Germany's Axel Weber and Juergen Stark have suggested the ECB's current benchmark rate of 4 percent may not be high enough to combat inflation. Today's reports "will dampen those remarks that an interest- rate increase will be needed,'' said Matthew Sharratt, an economist at Bank of America Corp. in London. "They are evidence of a moderation in euro-region growth.''[7] 'We need to see some retracement in the pace of inflation before the ECB starts to think about supporting growth in the economy,' said David Page, an economist at Investec.[12]

With inflation in the 15-nation euro region running at the fastest pace in 16 years, the ECB is reluctant to follow the U.S. Federal Reserve in cutting borrowing costs to bolster the economy.[6] The euro has appreciated 8 percent this year against the dollar, largely on speculation that inflation would discourage the ECB from following the U.S. Federal Reserve in lowering borrowing costs. They are currently at a six-year high of 4 percent in Europe.[5]

Food-price inflation in Europe accelerated to 6.2 percent in March from 5.8 percent in the previous month. That's the highest since the European Union's statistics office, Eurostat, began the current data series in 1997. The prices for rice, soybeans, wheat and corn have all risen to records this year.[7]

The current account deficit is running at over 6 per cent of GDP; interest rates are 15.25 per cent; inflation is over 9 per cent a year; and Turkey is ranked number five on a list of the most vulnerable economies by Standard & Poor's. You can see why the IMF's European director, Michael Deppler, who was in Istanbul last week, said he was "rather pessimistic about the financial picture of Turkey".[26] Economists had expected jobless claims to edge up to 375,000 from the 372,000 originally reported for the week ended April 12th. Investors also took note of a story in the Wall Street Journal suggesting that the Federal Reserve may stop cutting rates after easing its short-term interest rate by a quarter of a percentage point next week. The dollar saw its biggest one-day gain against the euro in years.[38] Expectations for a pause in U.S. monetary policy were bolstered by an article in the Wall Street Journal on Thursday morning, where Fed watcher Greg Ip said, "The Federal Reserve is likely to cut its short-term interest rate by a quarter of a percentage point next week -- but then may be ready for a breather."[23]

A rampant inflation rate hit the ZEW's economic expectations index, which plummeted to minus 40.7 points from minus 32.0 points in March. Elsewhere in the euro zone, French and Belgian business sentiment sharply declined, with the Belgian reading posting its largest monthly fall in the history of the indicator. [24] The Munich-based Ifo economic institute said its monthly index of 7,000 German executives slipped by more than forecast to 102.4 this month from 104.8 points in March, consequently bringing to an end three straight increases in the indicator.[17] Economists had forecast the index would fall to 104.3 after unexpectedly rising to 104.8 in March, weighed down by an economic slowdown and the strong euro.[22] Until today, German confidence had exceeded economists' forecasts, with Ifo's index rising unexpectedly in each of the last three months.[6] Gloating over the problems on the other side of the Atlantic should be the last thing on the mind of Joaquin Almunia, given the fall in German business confidence highlighted by the IFO index this week.[27] German business confidence took another blow Thursday, April 24, as the rise of the euro and soaring commodities prices contributed to a steeper-than-expected decline and fears of an economic slowdown.[18] The dollar's advance against the euro was fueled data showing that German business confidence deteriorated for the first time in 2008.[38]

The German economy had long seemed surprisingly resilient despite the slowdown in the United States, the international credit squeeze and a strong euro. Recent indicators and data suggest such factors are beginning to take a toll. The biggest European carmaker, Volkswagen, said on Thursday that its business was suffering because of the rise of the euro against the dollar.[18] German businesses are feeling the effects of record oil prices and a strong Euro. Despite their waning confidence, many believe that the economy remains robust and that it is headed for a period of moderation versus a significant slowdown. Despite the drop in confidence, don't expect the ECB to alter its hawkish stance with yesterday's improvement in Eurozone's PMI and the recent rebound in the current account from a deficit to a 4.3 billion dollar surplus.[39] BERLIN (Reuters) - German and French business morale fell sharply in April, depressed by a cocktail of high oil prices, a strong euro and market turmoil, and raising questions about whether the ECB will keep up its hawkish tone.[4] The comments came on the same day that surveys showed that German and French business morale fell sharply in April, depressed by high oil prices, a strong euro and market turmoil.[5]

"The message coming from the release of the business confidence indicators is unanimous across the main euro-area countries," economist Lavinia Santovetti of Lehman Brothers said. "At the start of the second quarter the outlook for the manufacturing sector has deteriorated substantially," she added. "In addition to the continued deterioration of the international environment, surging oil prices, the strong euro and slowing world demand probably explain these developments."[18] The Ifo Institute noted that business confidence weakened on account of higher oil prices and stronger euro.[36] BERLIN -- Business confidence is falling across the euro zone, a sign that the euro's strength and high oil prices are increasingly hurting a region that has weathered the U.S.-led global slowdown relatively well.[33]

"With the set of lead indicators for the euro area almost complete, we believe that sentiment in the euro area has weakened markedly," UBS European economist Sunil Kapadia told reporters. "Over the past few days, business confidence surveys have surprised on the low side in all the major euro area countries," he added.[18] Retreating confidence in Germany and France came on the heels of a drop in Belgian business confidence, which economists see as a bellwether for broader European sentiment despite the country's diminutive size. Those indicators put the final strokes on an emerging picture of gloom after a survey on Wednesday of euro-zone purchasing managers' confidence levels for the manufacturing sector fell to a 32-month low.[18]

Commenting on the German business confidence report, Fr'd'rique Cerisier, an economist at BNP Paribas said the German GDP growth would weaken substantially in the coming quarters.[36] A closely watched report from the Munich-based Ifo research institute showed that German business confidence deteriorated for the first time in 2008.[19] Commenting on the significant cooling of German business sentiment, as shown by the April Ifo business confidence indicator, Glos said there is no reason for panic.[15] Today, German IFO Business Confidence Indexes are coming out, and the forecasts expect a decline for the month of April.[40]

The German IFO business climate report released at 4:00 am ET, likely influenced the deals in the euro pairs.[41] LONDON (Thomson Financial) - The euro fell sharply after the Ifo survey, a key barometer of Germany's business climate, came in well below expectations.[25] Germany's key business climate index, the Ifo, fell to 102.4 in April from 104.8 in March.[13] The business climate index, calculated each month by the Munich-based economic research institute Ifo, dropped to 102.4 points.[22] The Ifo Business Climate Index is computed on the basis of 7,000 monthly survey responses of firms in manufacturing, construction, wholesaling and retailing.[36]

The business expectations sub-index, which measures the outlook for the next six months, declined to an indexed 96.8 points from 98.4 points in March while the business assessment index, which covers current conditions, dropped 108.4 points from 111.5 last month. For its monthly survey, Ifo polls 7,000 companies about their assessment of current business and their expectations for the next six months.[18] The indicator for the current trading situation fell to 108.4 from 111.5 in March, while the index measuring firms' business expectations for the next six months edged down to 96.8 from 98.4.[24]

Earlier Thursday, the French business confidence showed a decline to 106 in April from 108 in March, while the Dutch index fell to -12 from -9.[8] Belgian business sentiment was shown to have crumbled to -7.9 in April from 1.2 in March. Particularly in combination with weaker-than-expected euro-zone purchasing managers index data for the manufacturing sector, released Wednesday, these fresh business confidence numbers have taken some of the steam out of the euro's dramatic rise.[8]

The weak confidence data comes on the heels of release of soft manufacturing sector readings. A survey from NTC Economics and BME released on April 23 revealed that flash estimate of Purchasing Managers' Index for German manufacturing sector declined to its lowest level in 2008.[36] The data have been keenly awaited and will set the tone for euro moves, after the German ZEW survey and the Purchasing Managers Index sent out contradicting signals.[24]

'The decline of the Ifo index should wake up all decoupling believers who over the last months steadily advocated that the German economy had been able to shrug off the financial crisis and the U.S. slowdown,' said Carsten Brzeski at ING (nyse: IND - news - people ).[12] The Spanish credit group ASNEF says personal loans fell by 30 percent in the first quarter, the worst performance since the economic crisis of the early 1990'''s. Mortgage lending is also likely to be weak, and the bank's recent attempts to diversify its portfolio with deals in Texas and the purchase of a stake in China'''s CITIC may have been badly timed, given problems in the U.S. and the bear market in Chinese shares. French Finance Minister Christine Lagarde will be outlining her latest attempts to modernize the French economy on Monday. CNBC Europe's Stephane Pedrazzi has secured an interview with Madam Lagarde and will be pushing her on how she plans to challenge London's position as the financial capital of Europe. I am a big fan of the French Finance minister ever since she scolded me at the World Economic Forum in Davos for not putting my coat on despite freezing temperatures, but she needs to be realistic. There is a reason over 200,000 French people work in London: It is the undisputed financial capital of Europe and will remain so.[27]

Strong remarks against further Euro strength by Eurogroup chairman Juncker and ECB President Trichet also did no good to a Euro which failed to break successfully above 1.6000. Trichet said he notes more than ever that the U.S. says a strong USD is in its interest, and said he is concerned about the implications of forex fluctuations for financial stability. Juncker said he would not like global forex reserve holders to shift currencies and the status quo is good. Europe'''s largest business lobby, BusinessEurope, said Thursday they didn'''t like EUR/USD above a rate of more than 1.4000.[32] ECB policy makers said on Tuesday that the bank was prepared to raise interest rates if needed to bring inflation under control, the latest in a run of hawkish comments that helped drive the euro to a record high above $1.60 on Tuesday.[14] A sharp slowdown in Europe will damp inflation and force the ECB to cut interest rates within six months, the IMF's European Director, Michael Deppler, said in an interview on April 21.[7] Although many feel that a slowdown in Europe will alleviate inflationary pressures, there has been a significant amount of rhetoric regarding inflation concerns and possible rate hikes emanating from the MPC. However, many members including Bonello today have looked to diffuse any speculation of an increase in future interest rates, which may start to weigh on the Euro.[39]

Having inflation at nearly 10 per cent and interest rates at 15 per cent leads to all sorts of social strains.[26]

Vicky Redwood, economist at Capital Economics, agreed. 'The continued mixed news about the strength of the consumer sector boosts the chances that the MPC will proceed fairly cautiously in cutting interest rates,' she said, noting that the firm official data contrast markedly with downbeat surveys and other snapshots of the high street.[12] The data raised questions among analysts about whether the European Central Bank would continue to hint that interest rates may have to rise.[5] The February seasonally adjusted euro zone current account came in at a surplus of '4.3 billion following the previous month's '7.9 billion deficit, according to data from the European Central Bank.[23] A report from the European Central Bank, or ECB showed that the Euro zone's working day and seasonally adjusted current account showed a surplus of EUR4.3 billion in February.[31]

With the ECB still uncomfortable with the current high inflation levels, the central bank cannot immediately consider easing monetary policy for fear of exacerbating inflationary pressures in the single currency zone further.[12] The New Zealand central bank left rates unchanged at a record high of 8.25%, as inflation remains a concern.[39]

Economists had predicted a figure of 108, unchanged from the level seen in March. Citing a source, Market News International stated on Thursday that the Bank of Greece will not reappoint Nicholas Garganas as central bank governor, adding that George Provopoulos will be his successor.[23] New home sales in the U.S. were down for the fifth consecutive month in March, falling by 8.5% to 526k, much lower than the 580k level expected by economists and setting a new low since October 1991. This follows a downwardly revised reading of 575k in February from the previously reported figure of 590k.[20] The start of the spring season didn'''t encourage new property sales in the US: Sales of new U.S. homes fell in March to the lowest level in 16 and a half years, dropping by 8.5% last month to a seasonally adjusted annual rate of 526,000 units, the slowest rate since October 1991.[32]

The Ifo indicator reading fell to 102.4 in April from 104.8 in March. This was well below economists' forecast of 104.3 and it was the lowest level since January 2006.[15]

The median sales price of new houses sold in March was $227,600, down from February's revised median of $244,200. From a year ago, the median price of new homes has fallen 13.3%, the biggest drop in this indicator since 1970. In combination with the 2.0% drop in existing home sales reported earlier this week, economists say calls for stabilization have been premature.[20] The median sales price was over 13pc less than a year ago -- the biggest fall recorded since 1970. In contrast with this development, the number of workers filing initial claims for unemployment benefits unexpectedly fell last week, official figures showed; and orders for durable goods, excluding transportation, also rose by more than forecast, at 1.5pc in March.[21]

The average price of a new home in March also fell predictably, albeit by an astounding 13.3% compared to a year ago. This marks the largest year-over-year price decline since July 1970'''s 14.6% plunge. Another strong indication of a current U.S. recession is the latest U.S. durable goods data which fell 0.3% in March, worse than consensus.[32] A Prudential realty sign is posted outside a home for sale in White Plains, New York, U.S. Data yesterday showed new house sales in March slumped 8.5pc, its weakest rate since 1991.[21] AMERICAN house prices are showing the biggest annual fall in almost four decades, but they still are not selling. Data yesterday showed new house sales in March slumped 8.5pc, its weakest rate since 1991.[21]

The report showed that new home sales fell 8.5 percent to an annual rate of 526,000 units in March from the revised February rate of 575,000 units.[38] The Department of Commerce released its report on new home sales in the month of March, showing that sales of new one-family houses fell by much more than economists had been expecting to a 17-year low.[38]

The U.S. durable goods orders and the new home sales reports for March are expected to influence trading in the New York session.[31] Later today, the New Home Sales figures are also expected to attract trader's attention. Earlier this week we had better than expected U.S. housing market numbers.[40]

In a statement, the ONS said, 'Underlying growth in retail sales remains robust, driven by the food sector'. Elsewhere, the Industrial Trends Survey of Confederation of British Industry showed that UK manufacturers reported that domestic and export prices are growing at their fastest pace since 1995. Similar rates are expected over the coming three months.[19] Indicative of the resilient spending power, UK retail sales recorded strong growth in the first quarter, despite a bigger than expected decline in March, on the back of upward revision to February's data.[19] According to data from the Office for National Statistics, UK retail sales contracted 0.4% month-over-month in March versus the expected 0.3% decline.[20]

U.K.' s retail sales fell in March, according to a report released by Office of National Statistics, U.K. Retail sales were down 0.4% from the previous month.[19] LONDON (Thomson Financial) - The pound fell sharply after figures showed UK retail sales figures fell at their fastest pace in over a year during March.[42] The ONS stated that March's decline was the largest since January 2007, when retail sales fell 1.7%.[31] U.K. retail sales fell 0.4% in March from 1.1% the month prior, the first decline in three months.[39]

The Office for National Statistics said retail sales dropped 0.4 percent in March from February, roughly in line with analysts' forecasts for a fall of 0.5 percent and the sharpest decline since January 2007's 1.7 percent fall.[42]

The ECB is reluctant to follow the U.S. Federal Reserve in cutting borrowing costs to bolster the economy after inflation accelerated to 3.6 percent in March.[7] "Nonetheless, it might not be too long before further falls in business confidence turn the ECB's attention from upside inflation risks to slowing growth."[18] Berlin - Resurgent inflation and global economic uncertainty have combined to undercut business confidence across Europe with two key sentiment surveys falling sharply on Thursday.[3] January's reading was revised down from a deficit of '19.1 billion. Based on answers provided by business leaders to the National Institute for Statistics and Economic Studies (INSEE) in their monthly business survey in April, the industrial economic situation in France has deteriorated and the INSEE business confidence indicator has fallen to a 16-month low of 106.[23] The French Institute of Statistics and Economic Studies reported today that the composite indicator of French business confidence fell to 106 in April from a revised reading of 108 in March.[19]

German Business Confidence which had surprised on the upside the past three months came out softer than expected in April, falling from 104.8 in March to 102.4. That was quite a tumble in business confidence, and apparently wipes out the previous three months of stronger confidence. It's a "what have you done for me lately" world out there folks. Is this the mini-sell off I've been talking about since January? Could be I had a sneaky feeling yesterday, so I asked my chartist friend what he was seeing.[35] Announced at the same time as the German slump, a survey in France showed that business confidence was also deteriorating more than expected.[18]

The German IFO Institute reported the first drop in business confidence in four months.[39] The report showed that the business confidence in German services sector eased to 18.9 in April, after staying at 21 for three consecutive months.[36] A report from INSEE showed that the French business confidence indicator dropped to 106 in April from March's revised 108.[19]

LONDON (Dow Jones)--Faltering business confidence in Germany and a number of its neighbors could spell the end of the euro's months-long surge against the dollar and sterling.[8] In Europe, the dollar made strong gains against the euro after an influential business survey in Germany showed a bigger fall in sentiment than had been expected.[21]

'With regard to foreign business, however, the survey participants remain optimistic, despite the strong euro,' said Sinn releasing the German Ifo business survey, while the Paris-based statistics office said French export order books remained strong.[3] The German April IFO business climate stood at 102.4, while analysts expected 104.3.[41]

A gauge measuring German executives' assessment of the current business situation declined to 108.4 in April from 111.5 in March, Ifo said.[7] At 0804 GMT, it traded at $1.5789 compared with $1.5844 ahead of the Ifo survey. The roughly 7,000 companies participating in the Ifo poll assessed both current business and future trading less favorably in April.[24]

Analysts had predicted that the Ifo would slide to 104.3 in April. This month's drop in the closely-watched index came in the wake of a rising euro and skyrocketing energy costs. While the euro this week climbed to an all-time high of more than 1.60 dollars, oil prices hit a record just short of 120 dollars a barrel. [17] "High oil prices, the euro's exchange rate, and the economic situation in European neighbours are all playing a part as well. I think these figures show that industrial production will slow in the second quarter, and also that GDP will slow as well."[21]

The dollar gained after a weak printing of the European manufacturing activity suggested that economic growth in the Euro zone is starting to slow.[40] European Economic data and official comments start to turn against the Euro and in favor of the U.S. dollar.[40]

European Union Economic and Monetary Affairs Commissioner Joaquin Almunia spoke at the European Central Bank Conference on Statistics in Frankfurt on Thursday and said that market statistics needed to be accurate, independent and credible. "Our economies and societies are in a state of rapid transition and we rely on statistical data to understand and respond to the new trends that are shaping the world we live in," he said.[20] Later on in the day European Central Bank President Jean-Claude Trichet is expected to speak. His remarks generally bring volatility to the market.[40]

Noyer joined other officials from Europe in airing concerns about the faster rise in consumer prices and said that the central bank will do whatever is necessary to keep a lid on inflation.[12] The central bank has continued to warn of the ongoing downside risks to consumer spending and the housing industry, and may need to cut rates further if current measures fail to stabilize the market.[39] According to him, the central bank's Special Liquidity Scheme, launched earlier in the week, should ease current funding pressures.[19]

Glos also called on the European Central Bank not to engage in euro-boosting activities.[20]

Speaking to reporters at a conference in Frankfurt, the ECB president, Jean-Claude Trichet, said the bank was concerned about the euros latest surge. The euro climbed to $1.6019 on Tuesday, the highest level since its debut in 1999, undermining the outlook for European exports.[5] Just a day ago, many market traders believed in the ECB's clear preference for inflation-fighting high interest rates would inevitably push the euro back through $1.60.[8] Trichet gave no indication that would change, reiterating that the current level of ECB interest rates "will contribute to achieving our objective, which is price stability."[5] Comments made by the ECB Governing Council member Noyer yesterday, dampened speculation of the possible Interest Rate increase in Europe, giving the USD another push forward.[40]

Key interest rates of 4.0% in the 15 countries sharing the euro make the euro zone more attractive to investors, compared with the U.S. where key rates stand at 2.25%.[15] Hawkish comments about raising interest rates on Tuesday helped drive the euro to the new record.[5]

Record interest rates and a strong currency combined with the headwinds generated by the U.S. subprime crisis is slowing growth faster than the MPC anticipated.[39]

"Overall, German manufacturers are not yet feeling any spill-over effects from the U.S. crisis.'' Investors have all but priced out the possibility of an ECB rate cut this year, futures trading shows.[6] Unemployment jumped on Friday, and Spain'''s business lobby warned last week that the country is falling rapidly into stagflation. With the ECB looking less and less likely to cut rates as inflation rises, I think they are probably right.[27] Although so far it has shown more interest in holding rates at 4.00%, to keep a lid on inflation, the steady trickle of worrying macroeconomic news from the Eurozone could bring with it expectations of a rate cut.[13]

Eastern Europe? Well, yes. While only 3 per cent of Turkey's land area is in Europe and EU membership remains over the horizon, the economy is now fully integrated into the European one and the numbers are very similar to those of the EU's new member states. It has been growing at between 4 per cent and a peak of 9 per cent for the past six years. Even this year it seems likely to grow at more than 4 per cent. [26] European companies are also grappling with the euro's appreciation, which is making exports less competitive just as the U.S. economy, one of Europe's biggest trading partners, teeters on the brink of a recession.[7] With the U.S. heading for recession, the European Commissioner for Economic Monetary Affairs could be forgiven for lauding the strength of the European economy when he unveils his spring economic forecast on Monday.[27]

The downturn has been largely due to internal economic issues over the strength of the EUR. Manufacturing PMI numbers suffered yesterday and forecasts point toward business confidence sharing the same fate.[40] While the business confidence for industry and trade clearly declined in April, the business climate indicator for the construction sector improved.[36] The gauge saw declines in all three components with the business climate index falling to 102.4 from 104.8; current assessment to 108.4 from 111.5 and expectations to 96.8 from 98.4.[39] The consensus had called for the current assessment to come in at 111.0 while the expectations index had been forecast at 98.0.[20] The mid-range forecast of 52 economists polled by Reuters last week was for the index to slip to 104.3, with predictions ranging from 103.0 to 105.0.[30] Economists had predicted a smaller decline in the Ifo index to 104.3, while the gauge of French optimism was expected to hold at 108.[7]

Economists had expected sales to edge down to a 585,000 unit rate from the 590,000 unit rate originally reported for the previous month.[38] 'The housing crisis continues, with sales of single-family homes sliding for five straight months, at a quickening pace, and nearly as fast as starts,' noted Sal Guatieri, senior economist from BMO Capital Markets. 'The massive overhang of homes on the market will keep prices on a downward slope, raising the downside risks for both the economy and financial markets."[20] Glos also said current high oil prices are also a risk factor to the German economy, calling for an increase in oil output. The impact of the global financial-market crisis is difficult to predict, he said.[15] "The euro/dollar exchange rate has reached a level that isn't easy to adjust to," Glos said. "It would be an illusion to believe that the weak economic situation, such as in the United States - many call it a recession - won't have any repercussions for the German economy. This certainly won't be the case. We are no paradise island, even though we are relatively well positioned," he said.[15] More than 80 percent of German exports are priced in euros, BGA President Anton Boerner said. "It's remarkable how robust the German economy is,'' Boerner said.[6] The significant monthly downturn will increase fears over a significant slowdown in the German and wider Euro-zone economy, especially as the Euro strength was a contributory factor.[43]

The German IFO survey will increase speculation over a sharp economic slowdown and is liable to trigger a deeper Euro correction.[43] Today (Thursday) has been a day of strong U.S. dollar rebound against the Euro, based on weak German IFO numbers and technical dominoes on the charts.[32] The index stood at 105.6 in February, down from a reading of 107.1 in January. In early deals on Thursday, the U.S. dollar trended higher against the euro and reached 1.5720 at about 5:00 am ET. This is the highest point for the dollar since April 18.[31]

The Japanese Ministry of Economy Trade and Industry's all-industry activity index fell 1.4% month-over-month in March despite calls for a 0.5% decrease and the previous month's unchanged reading.[20] The Confederation of British Industry's industrial trends index fell to a reading of -13% in April compared to March's +7% level.[23]

National statistics office Insee's confidence index in the manufacturing sector fell to 106 from a downwardly revised 108 in March.[33]

A report released by the Bank of Japan today showed that Japan's corporate service price index increased 0.4% on month and 0.4% on year in March.[31] Industrial price index rose 6.9% year-on-year in March, marking a faster pace than the 6.7% expected.[19]

In Spain, the statistical office INE reported that producer price annual inflation rose faster than expected in March.[19] Statistics Sweden announced that the country's producer price annual inflation eased to 3.1% in March.[19]

Producer prices rose less than 4.2% growth in February and 3.7% expected by economists. [19] Companies are "still coping more or less'' with the stronger euro, said Gernot Nerb, a senior Ifo economist. Rising prices for oil and food pose a greater problem by draining consumers' disposable income, he said.[6] "Everything is worrying for executives: raw material prices climbing almost uncontrollably, the euro's rise, the global slowdown that's shaping up,'' said Bruno Cavalier, an economist with Oddo & Cie. in Paris.[7]

The French and German business surveys released Thursday also indicated that the strong euro had so far not emerged as a critical issue for industry. [3] An increasing number of European companies are being squeezed by the strength of the euro. The German chip maker Infineon said Wednesday that it would miss its profit target for 2008 to 2009 if the dollar did not recover from recent lows versus the European currency.[5] Daily Strategy: The dollar rises against the euro after the support by the European politics.[44]

"The U.S. data is pretty clearly dollar positive and we're coming off some weaker European data today already," said Brian Dolan, head of research at consultancy Forex.com, in Bedminster, New Jersey.[29] NEW YORK, April 24 (Reuters) - The dollar rose broadly on Thursday after government data showed better-than-expected readings on weekly jobless claims and last month's durable goods, indicating that the U.S. economy may be stabilizing.[29]

Total gas in storage was 1,285 Bcf, slightly below the average range. In Canada, the Bank of Canada released its spring Monetary Policy Report, which said the Canadian economy has been sideswiped by the U.S. downturn and continuing turmoil in global financial markets and is unlikely to get fully back on track until 2010.[20] The U.S. housing slump has resulted in losses and writedowns at the biggest financial institutions of about $290 billion so far. That's made banks reluctant to lend, pushing up the cost of credit and threatening to curb global growth.[7]

We have to look at what is happening in the United States." His comments during a press conference on the government's spring growth forecast come at a time when the euro is sharply rising, climbing above $1.60 for the first time Tuesday. It has retreated, last trading at $1.5750 at 1106 GMT.[15] The euro was trading around $1.56. "We have observed in the recent period of time sharp fluctuations and we are concerned about their possible implication for financial and economic stability," Trichet said.[5]

Thursday, April 24, 2008 10:32:03 AM - The euro saw weakness on Thursday in New York as traders considered some weak economic reports released from the euro zone.[19] The value of the euro tailed off on the news from various European confidence indexes released on Thursday.[18] Economic confidence in the former star of the European economy is at a 14-year low, and with the housing market looking like it is about to fall off a cliff, even a '''10 billion fiscal stimulus package is unlikely to stop a significant slowdown or potentially a nasty recession.[27] Economists at BNP Paribas recently commented that the recent economic reports signaled that the French economy really started slowing in the second quarter.[36]

The latest figure is well below the four-week moving average of 369.5k, which moved down from the previous week's reading of 376k. 'This report suggests a slight improvement in the U.S. labour market, though we believe that the uptick in the employment picture may be short-lived,' said Millan Mulraine, economics strategist from TD Securities. 'Moreover, it is important to note that this survey period will not be included in the U.S. nonfarm payrolls report out next week."[20]

Italian consumer confidence held near the lowest level in four years and Dutch consumer sentiment declined to the lowest in more than two years, reports showed today.[2] The year-over year figure fell to 4.6% from a revised 6.3%, but better than the 4.3% that was expected. The slumping housing market has started to weigh on consumer confidence and curb their spending.[39]

Confidence in the French industrial sector also soured more than expected in April, falling to the lowest point since December 2006, a survey by France's INSEE statistics office showed.[18] 'According to business leaders surveyed in April, the industrial situation has worsened,' France's statistics office INSEE said releasing the French business confidence survey.[3] Dutch business confidence was at about a three-year low, a survey also released Thursday said.[3]

French business confidence dropped to a 16-month low in April, the country's statistics office in Paris said today.[6]

"After a brief brightening at the beginning of the year, the survey results indicate a slower pace of business activity," Ifo's Hans-Werner Sinn said. [34] The euro edged down 0.8 per cent to 1.5758 in trading Thursday following the release of the Ifo survey.[1]

We are still in the rate of the 50s, so we are still alarmed,''' Secretary General Philippe de Buck said. Putting all these together, EUR/USD sentiment is looking quite bearish as Euro bulls should become reluctant to shoot for 1.6000 for the time being, especially after EUR/USD failed to hold the 1.6000 level. EUR/USD fell over 200 pips to the mid of 1.5600 on triggering of stop orders as the currency pair lost balance below its up trendline. [32] Kiwi ( NZD ) will remain a high yielder. As long as risk appetite is strong, the high yielders like kiwi, Iceland ( ISK ), and South Africa ( ZAR ) all get to bask in the warm glow of risk takers But As I've explained above, I don't think this is anything to hang your strong currency hat on. Norway's Norges Bank did indeed hike rates 25 BPS, as I expected them to do, yesterday. This move didn't help the krone ( NOK ) hold off the dollar's move.[35] "Economic activity has weakened more markedly than expected in the Bank's March Monetary Policy Statement.[35] Economists had expected a smaller drop to 108 from the 109 originally reported for March.[14]

Economists predicted a decline to 104.3, according to the median of 43 forecasts in a Bloomberg News survey.[6] BMW prices would not be helped by a forecast from James Brown, a labour market analyst with New York State's Labor Department, that Wall Street could lose over 36,000 jobs because of the financial crisis.[21] Japanese corporate services prices rose 0.4% year-over-year in March, short of forecasts for a 0.7% increase and the previous month's 0.7% gain.[23]

The German IFO index weakened to 102.4 in April from 104.8 the previous month which was significantly below expectations. [43] Rees said the findings showed that the "jump in sentiment in previous months was puzzling and clearly too good to be true." He said that manufacturers and exporters are "sitting on a huge pile of backlog orders" that is coupled with continued demand from Brazil, Russia, India and China. "However, this does not mean that the Ifo index will not decline further," he said.[9]

Analysts had predicted that the closely-watched Ifo index would slide to 104.3 in April with a sharp fall in sentiment in Germany's key manufacturing sector helping to lead the monthly decline in the index.[1]

Japan's Ministry of Economy, Trade and Industry reported that all industries activity index in Asia's largest economy was down 1.4% month-on-month in February.[19] All industries activity index declined 1.4% on month in February, the Ministry of Economy, Trade and Industry said.[31]

The Euro fell nearly 100 points on the news from 1.5835 to 1.5739 before finding support. [39] The euro fell a cent against the dollar after the release, to $1.5752 at 10:36 a.m. in Frankfurt from $1.5842.[6] At about 4:15 am ET, the euro fell to a 6-day low of 1.5743 against the dollar. Against its British counterpart, the euro touched 0.7980, which set a 3-day low for the latter. The euro-yen pair that closed Wednesday's deals at 164.29, dipped to a 2-day low of 163.60 during this time period.[41]

Essilor International, the worlds largest maker of spectacles, said on Wednesday that the dollars weakness against the euro was crimping sales.[14] Even ultra-gloomy U.S. home sales and durable goods data couldn'''t stop the technical bearish momentum of the Euro.[32]

The euro tumbled by nearly 0.8% to trade at a low of $1.5718 after the German data were released. It also sank by 0.4% against sterling to hit a low of GBP0.7960 and by nearly 0.7% against the yen to reach Y163.13.[8] The Euro dipped to lows near 1.5750 after the IFO data and the comments from G7 officials will remain in close focus in the short term.[43]

The Euro is 'correcting' lower, partly on the assumption our rate cutting is over, or within 25bp of over. It has always been less a question of a strong Euro, and more a question of a weak Dollar.[32] When the dollar's move gets turned around (that's my opinion, and I certainly could be wrong), the higher interest rates, and wider interest rate differential in favor of the krone, will help propel it higher.[35]

In Britain there is a clear distinction between what is happening in the housing market and what is happening to the real economy. News on the former is still pretty grim, whereas things such as retail sales and exports seem to be holding up reasonably well. [26] Sales are plunging because tax has been increased and, as part of the country's heritage, Turkey is trying to get Brussels to allow it to cut the tax. At least there is discipline on taxation. There is no such EU-imposed discipline on fiscal and monetary policy. Does this matter? We in the UK have managed to establish a set of fiscal and monetary rules which, although bent at the edges, have allowed Britain to combine relatively rapid growth with low inflation. It can be done.[26] One will be energy and commodity prices. If these remain high, that says demand is being maintained - it says there is growth somewhere in the world. A second is world trade. This has been growing at 7 to 8 per cent a year in volume through the boom and it is going to come down to perhaps half that. These, though, are both co-incident indicators in that they tell you what is happening rather than what is going to happen.[26] The third indicator gives some advance warning and that is the Ifo survey. German businesses will see any change in world trade in manufactured goods months in advance, for they will see a fall-off in their order books.[26] Referring to the decline in German confidence, Ifo chief Hans-Werner Sinn told reporters that the mood had gotten darker in the German manufacturing, wholesale and retail sectors in particular.[18] At 8 GMT along with the German IFO numbers we will get Euro-Zone Current Account details, which should not contribute to volatility.[40] A separate Ifo gauge of current conditions fell to 108.4 in April from 111.5 the previous month.[14]

The slip was two percentage points below expectations, a drop which the Ifo Institute attributed to a "slower pace of business activity."[13] The business expectations sub-index, which measures the outlook for the next six months, declined to an indexed 96.8 points from 98.4 points in March.[22]

Orders for goods meant to last for at least three years unexpectedly fell in March, according to a report released by the Department of Commerce on Thursday, although the decrease was largely due to a decrease in orders for transportation equipment. [38] The report showed that durable goods orders fell 0.3 percent in March following a revised 0.9 percent decrease in February.[38]

We're "not heading toward a marked slowdown, but more of a moderation in growth,'' Kai Wildfoerster, a fund manager at Pacific Investment Management Co. in Munich, said before Ifo's report. [6]

"The market is beginning to question whether the euro zone is isolated from the U.S. slowdown or whether we're finally beginning to see a catch-up in the euro zone softening in line with the U.S. and that clearly is euro negative," said Adam Cole, global head of currency strategy at RBC.[10]

There was particular concern among analysts about the state of the retail sector. "It was just a matter of time until the German economy would bow under the deterioration of the external environment," said Carsten Brzeski at ING. [34] For now, the darkening business outlook has dented the case for the European currency to climb significantly above $1.60, which it briefly crossed on Tuesday.[8]

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2. Indiainfoline.com-Top stories,Leader speak,company news,sector news,Market talk,lifestyle,budget,market today,global indicators
3. ANALYSIS: Business confidence slumps across Europe - Business
4. Germany leads drop in euro zone business sentiment | Reuters
5. Trichet says U.S. needs to support dollar more than ever - International Herald Tribune
6. Bloomberg.com: Economy
7. Bloomberg.com: Economy
8. EURONOMICS: Euro Sinks As Business Confidence Withers
9. German business confidence drops to 2-year low in April - International Herald Tribune
10. RPT-GLOBAL MARKETS-Stocks, euro extend losses after weak Ifo - Finance.cz
11. FOREX-Euro knocked by weak Ifo, 3 U.S. cents off peak | Currencies | Reuters
12. European government bonds rise as Germany's Ifo confidence survey falls - Forbes.com
13. German Frowns Hurt The Euro - Forbes.com
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15. German Min: Exports To Slow Due To Weaker Global Econ, Euro
16. DJ MARKET TALK: EUR/USD Seen Weighed By Data Again - DowJonesNewswires - Onet.pl Biznes - 24.04.2008
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19. RTTNews - Forex News top stories, Forex Trading, European Market Update, Currency Market Update, Forex trading.
20. Canadian Economic Press - Welcome
21. US housing sales down despite prices - World, Business - Independent.ie
22. RT' Business: German business confidence hit by US woes
23. Canadian Economic Press - Welcome
24. DJ German Ifo Hits Lowest Level Since Jan 2006 - DowJonesNewswires - Onet.pl Biznes - 24.04.2008
25. Forex - Euro dives as Germany's Ifo survey falls short of expectations - Forbes.com
26. Hamish McRae: If Germany offers a window on global financial health, then the view is good - Hamish McRae, Business Comment - The Independent
27. Europe Preview: Spring Forecast on the Way - Technology * Europe * News * Story - MSNBC.com
28. German business confidence at 2-year low
29. FOREX-Dollar rises broadly after U.S. economic data | Currencies | Reuters
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31. RTTNews - Currency Trading, Currency Market Update, Trading Opportunities, US Market Update .
32. Why Did the Euro Fall Sharply Today? - Seeking Alpha
33. Free Preview - WSJ.com
34. BBC NEWS | Business | German firms 'more pessimistic'
35. IFO Pushes the Euro Lower
36. RTTNews - Realtime Economic News, Global Economic News and Reports, Asian Economic News, Economic Calendar.
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38. RTTNews - Realtime Economic News, Global Economic News and Reports, Asian Economic News, Economic Calendar.
39. German Business Confidence Falls, Sends Euro Below 1.5750
40. 24/04/'08 - USD Saga Continues.
41. RTTNews - Currency Trading, Currency Market Update, Trading Opportunities, US Market Update .
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