NEWS / Foreign Exchange

European Services PMI Data Indicates Renewed Expansion

- The European indices are currently trading at mixed levels initially led higher by the auto sector after Daimler Chrysler confirmed that it was in talks regarding its Chrysler unit. Lower oil prices weighed down on oil sector during pulling some of the major indices into negative territory.

- European government bonds opened relatively flat during the session with risks to the downside as bund futures have hit lows consecutively over the past few sessions. After reaching its highest point since August of 2004 yesterday, the yield on the 10-year gilt sits just beneath the 5.00% level. Ahead of tomorrow??™s interest rate decision gilts are trading higher, possibly indicating that traders do not expect the Bank of England to raise interest rates.

- European services PMI figures were mixed during the month of March. Italian PMI and Euro-Zone fell below estimates, while French and German PMI figures exceeded estimates. Although the PMI figures were mixed, all figures remained above 50 indicating continued expansion. Services PMI figures indicate renewed expansion as both new business and continued hiring persist.

- Euro-Zone retail sales for the month February showed a slight recovery. Retail sales rose to 0.3% m/m from ??“0.8% in January. Retail sales rose to 1.2% y/y from January??™s initial reading of ??“0.1%, however January??™s reading was revised up to 1.1% from ??“0.1%. The downward movement seen in January has been largely attributed to the implementation of the German VAT hike. The recovery in retail sales suggests that the impact of the VAT hike has probably been overcome.

- Oil prices eased during the Asian session on profit taking as tensions between Iran and the UK continue. Recall that, during yesterday??™s European shift, UK prime minister Tony Blair said that ???the next 48 hours would be critical???, furthermore noting that the UK would toughen its stance on Iran. Crude continued to move lower ahead of the European open, but rebounded after a story published in the Kuwaiti based Arab times saying that the US has plants to attack Iran??™s nuclear facilities by the end of April.