NEWS / Foreign Exchange

The Manufacturing ISM index moderated

Manufacturing ISM

Actual: 50.9 Consensus: 51.2 Prior: 52.3

Slightly lower than expected, the Manufacturing ISM index moderated in line with the latest trend exhibited by The Empire State Index ??“a gauge of manufacturing activity in the Federal Reserve district of New York- and the Philadelphia-Fed Index. As expected this slow down was partially compensated by a modest rebound in inventories.

Non-manufacturing ISM

Actual: 52.4 Consensus: 55.5 Prior: 54.3

Activity in the services sector decreased more than expected but consistent with our baseline scenario of lower, but controlled, economic expansion in 2007. The Non-Manufacturing ISM Index stood at 52.4, the lowest in the last four years.

Nonfarm Payroll & U Rate

Actual: 180K, Consensus: 128K, 4.6% Prior: 97K, 4.5%

The most important news of this week was the rise in the latest Nonfarm payroll index. We expected a good number thanks to, among other things, the improved weather conditions and the consequent rise in employment in the construction sector. But the actual rise of 180K - after upward revised gains of 113K in February and 162K in January was much higher than expected. This number means that the first quarter closes on solid footing, even after taking the February slowdown into account. The rise in nonfarm payroll will surely give a boost to growth expectations and will help calm fears of some market participants. Furthermore, the number is consistent with our projection of a smooth landing in 2007, with the backdrop of a solid economy thatwill not need help from any loosening from the Fed.

Wholesale Inventories (February, Friday 10.00 am)

Actual: 0.5% Consensus: 0.4% Prior: 0.7%

Wholesale inventories were higher than the consensus, but in line with our expectations. This number raises doubts about a long lasting slowdown in inventories (as inferred by many analysts from the latest GDP numbers). But given the inherent volatility of inventories, it is too early to infer if the latest downward trend is permanent or, as this latest number may suggest, was really transitory.

**** Markets were close for holidays on Friday 6, 2007 *****