During the NY trading session last night, we saw continued poor economic data in the manufacturing space.
US Feb Industrial Production fell lower than expected while the March Empire Fed State Mfg Index fell to its all time low. The Dow, though closed just 7 pts lower as the market has already discounted such poor economic data results.
News that will actually move the markets these days are extraordinary news e.g. auto-makers, AIG bailouts, level of credit card defaults, CMBS related losses because the stock markets have already priced in an extreme scenario.
With regards to forex, we saw yesterday that the US TICs data showed a surprise reversal in capital flows in the US in Jan 09. There had been an outflow of USD 43 bn from the US vs a USD 34.7bn inflow in Dec 08.
For the first time in 6 months, foreigners actually sold US corporates and Americans bought foreign bonds.
Indeed, private investors sold more T-bills than they bought, ending months of USD repatriation.
The safe haven demand for the USD had been curtailed as investors have started to seek riskier assets elsewhere. Recent price movement of the USD also showed the Dollar Index failing to make new highs.
The USD will face further weakening if the above mentioned outflows continue to persist going forward.
Watch this space.
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