Economic Calendar for week January 28th - February 1st 2008

All times GMT

Monday Jan 28th

EU - 09:00 - M3 Money Supply Y/Y.
US - 15:00 - New Home Sales.

Tuesday Jan 29th:

EU - 09:00 - Current Account.
UK - 11:00 - CBI Distributive Trades Realised
US - 13:30 - Durable & Core Durable Goods Orders M/M.
US - 14:00 - National HPI Composite-20 Y/Y.
US - 15:00 - Consumer Confidence.

Wednesday Jan 30th:

UK - 09:30 - Mortgage Approvals.
UK - 09:30 - Net Lending to Individuals M/M.
US - 13:15 - ADP Nonfarm Employment Change
US - 13:30 - GDP Annualized Q/Q.
US - 13:30 - GDP Deflator Annualised Q/Q.
US - 15:30 - Crude Oil Inventories
US - 19:15 - Interest Rate Statement.

Thursday Jan 31st:

GE - 08:55 - Unemployment Rate.
EU - 10:00 - CPI Y/Y.
EU - 10:00 - Consumer Confidence.
UK - 10:30 - Consumer Confidence.
US - 13:30 - Core PCE Price Index M/M.
US - 13:30 - Personal Spending M/M.
US - 13:30 - Personal Income M/M.
US - 13:30 - ECI Q/Q.
US - 13:30 - Unemployment Claims.
US - 14:45 - Chicago PMI.

Friday Feb 1st:

GE - 08:55 - Manufacturing PMI.
EU - 09:00 - Manufacturing PMI.
UK - 09:30 - Manufacturing PMI.
US - 13:30 - Nonfarm Employment Change.
US - 13:30 - Unemployment Claims.
US - 13:30 - Average Hourly Earnings M/M.
US - 15:00 - ISM Manufacturing Index & Manufacturing Index Prices
US - 15:00 - Consumer Sentiment.
US - 15:00 - Construction Spending M/M.

EU - Europe wide
FR - France
UK - United Kingdom
US - United States
GE - Germany

The week ahead.

Last week will go down as one of the defining moments in the history of the FOMC and Ben Bernakes tenure. The Feds emergency 0.75% rate cut, came on the back of global stock market crashes on Monday, and rapidly increasing concerns over the outlook for the US economy.

US markets were closed for Martin Luther King Day on Monday as the melee ensued on European markets. As with the 1987 and 2001 single day crashes, the Fed was quick to act as it cut rates before the cash market open. The initial response to the action was mixed, as traders were unsure how to interpret the magnitude of the actions. Some saw it as the Fed providing a much needed shot in the arm for the economy, while others saw it as an warning that the US economy was indeed in dire straights.

Eventually the bulls won out and the markets rallied, with the S&P 500 and Dow Jones actually managing to finish up on the week. While scepticism persists over the likely impact of the Bush economic stimulus package, markets were certainly buoyed by talk of plans for a bail out for ailing Monoline bond insurers such as Ambac and MBIA. Speculation also increased that the dramatic sell off in European equities on Monday, wasnt in fact due to concerns of a global recession, but because of the unwinding of massive fraudulent trades posted by a trader at Societe Generale. SGs Rogue trader took hidden positions against the falling market, which had to be unwound when discovered over the weekend. As these trades were made completely against the movements of European markets, they resulted in a $7.1Billlion dollar loss when they were forcedly unwound. The FOMC denied they knew about the fraud when they took their decision on Monday.

Currency markets reacted to hawkish comments from the ECB that indicated they would be sticking to their primary mandate of fighting inflation. They also denied that there was a US style subprime problem in the Eurozone. The Euro rose against the dollar, as speculation increased that there will be a further interest cut at next weeks FOMC meeting. The Pound also rose against the Dollar as the minutes from the last MPC meeting showed that the members had voted 8-1 for no change in interest rates. Safe haven assets such as Gold continued to benefit from continued uncertainties, with Gold pushing to all times highs of $923 per ounce on the back of mining problems in South Africa.

This week has many top tier US announcements, with the aforementioned FOMC rate decision at 19.15 on Thursday top of the list. In addition, traders will pay particular attention to Mondays new home sales data. It will probably be too soon for last weeks rate cut to filter down, but US mortgage brokers are already reporting a flurry of activity. Tuesday brings US core durable goods and consumer confidence figures into focus, while Wednesdays employment and GDP figures will add to an already significant week ahead.

Uncertainty abounds as evidenced by Fridays sell off in equities and a flight to quality over the weekend. Rumours of Belgian banks being hit by huge write downs and whispers hedge funds going bust hit the early positive sentiment on Friday. With so much uncertainty over how to interpret the Feds emergency rate cut in light of the SG fraud, traders are unsure of the size of the expected cut at this weeks FOMC meeting. With many top tier announcements in the pipeline, a volatility trade may be the better option for the week ahead. An up or down trade pays out if either of two predetermined triggers are hit. Setting these triggers as 1265 and 1385 on the S&P 500 could return 12% over the next 15 days.

David Evans

Economic Calendar for week 21st - 25th January 2008

All times GMT

Monday Jan 21st:

UK - 00:01 - Rightmove House Price Index M/M.
GE - 07:00 - PPI M/M.
UK - 09:30 - M4 Money Supply M/M.
UK - 09:30 - Public Sector Net Borrowing.
UK - 09:30 - BSA Mortgage Approvals.
US - ALL - Holiday: Martin Luther King Day

Tuesday Jan 22nd:

US - 15:00 - Richmond Fed Index.

Wednesday Jan 23rd:

FR - 07:45 - French Consumer Spending M/M.
UK - 09:30 - GDP Q/Q.
UK - 09:30 - MPC Meeting Minutes.
UK - 09:30 - Index of Services Q/Q.
EU - 10:00 - Industrial New Orders M/M.

Thursday Jan 24th:

GE - 09:00 - Ifo Business Climate Index & Business Expectations Index.
UK - 09:30 - BBA Mortgage Approvals
US - 13:30 - Unemployment Claims.
US - 15:00 - Existing Home Sales
US - 15:30 - Crude Oil Inventories.

Friday Jan 25th:

GE - 07:00 - Consumer Confidence.

EU - Europe wide
FR - France
UK - United Kingdom
US - United States
GE - Germany

The week ahead.

Last week stock markets continued to follow the path of least resistance, with the FTSE posting its worst January since 2000. From the 2007 highs the FTSE has dropped as much as 13%; the S&P 500 16.7% the Nasdaq 18.8% and the wider Russell 2000 over 22%.

Last weeks Philly Fed figures came in at 20.9%, which according to some analysts indicates a severe economic contraction. Following this, Fed Chairman Ben Bernake failed to calm the US equity markets by not delivering the emergency rate cut that had been rumoured to be forthcoming. A lack of decisive action has been a common criticism of the US central bank.

Friday opened up positively as traders looked for a rebound. The catalyst was IBM and GEs better than expected earnings announcements on the back of strong overseas growth. However, markets soon reversed as Bush revealed his Governments plan for economic stimulation. Wall Street was clearly unimpressed, with many believing the plans to be too little, too late and perhaps more importantly aimed at the wrong part of the economy.

Oils pullback from $100 per barrel may have also helped allay some inflationary concerns, though the pull back has coincided with a drop in the share price of oil majors such as Exxon Mobil and BP.

Next week has few top line economic announcements from the US with Thursdays existing home sales the stand out event. In addition, the US stock markets are closed on Monday for Martin Luther King Day. The currency markets could still see some action following North American announcements though, this time from Canada. The loonie(as the USD/ CAD exchange rate is called) could be significantly affected by Tuesdays BOC Interest rate statement and retail sales.

On Wednesday the UKs MPC release their minutes from the last meeting. They disappointed investors at their last meeting by keeping rates the same, so analysts will be keen to discover just how close that decision was. UK GDP figures are released at the same time.

Going forward, the big question is whether the bulls can mount a meaningful fight back for the first time in 2008. On the positive side, there are some statistics that point to the possibility of some relief.

According to research from Fusion IQ when the % of stocks above their 200 day moving average falls below 20, an intermediate term low could be imminent. The statistic was reasonably accurate at calling the 1998 and 2002 lows. Stocks are currently trading around this marker, but it is unlikely that this will call a bottom to the day.

In addition, according to Bespoke Investments the S&P 500 is currently 3.5 standard deviations from its 50 period moving average. This condition has occurred just 17 times since 1980. 20 days later the S&P is positive 61.5% of the time.

While a waterfall style plunge may still be on the cards, recent market performance could indicate that a short term low may not be too far away. An up or down trade returns a profit if either of two barriers are touched and is effectively a volatility trade. The VIX options volatility index is still well below its August spike, which could indicate that there is further volatility to come, particularly with the next FOMC interest rate decision due at the end of the month. By placing the upper of the two barriers further away from the spot price compared to the lower barrier, a trader could benefit from a quick snap reversal while providing exposure to some further selling. An up or down trade with the barrier levels set to 1295 and 1365 could return 14% over 12 days on the S&P 500.

Home Sellers' Pain Is Renters' Gain

There's one bright side to the housing crisis: some lower rents.

The regions hardest hit by the housing downturn have seen ailing builders, rising foreclosure rates and a glut of unsold homes, amid other signs of distress. But there are also stories like Laura Evans's.

The 38-year-old elementary-school teacher moved to Stuart, Fla., from Orlando with her husband and baby last fall. Looking for a rental apartment, they were pleasantly surprised: There were plenty of choices at lower-than-expected prices, thanks to the multitude of owners trying to rent units they couldn't sell.

"When we got down here, we shopped and shopped around," says Ms. Evans, who rented a new 2,200-square-foot, three-bedroom townhouse with a pool and a playground for $1,150 per month. The owners allowed the couple to move in with their dog, despite a prohibition against pets.

To be sure, rents have continued to rise steadily in many markets. And the housing downturn means that more people are looking for rentals as well, increasing demand. Many would-be buyers have become renters because they can't get a mortgage in today's tight credit environment, or because they're sitting tight in hopes that prices drop further.

But in the regions hit hardest by the subprime crisis, finding a rental apartment is easier and, in some cases, cheaper than it was before the crunch. Some homeowners forced out by foreclosurePort St. Lucie, Fla. are finding rental deals that are at "discounts of 50% to 70% off what they were paying on their mortgages," says Brenda F. Gerdes, who owns Management Specialists Inc. in

Vacancies have risen in 29 markets in the fourth quarter of 2007, including Las Vegas, Palm Beach, Memphis, Orange County, Calif., and Orlando, according to Reis Inc., a New York real-estate research firm. Ron Witten, a Dallas-based housing analyst, estimates there are 760,000 vacant condos and homes for sale nationwide beyond what the market could normally carry, in addition to a surplus of 350,000 vacant rental properties.

Behind the trend are tens of thousands of unsold condominium units that are being dumped on markets such as South Florida, Las Vegas and Phoenix. While thousands of single-family homes also are coming on the market, renters prefer condos to houses, which typically have more expensive upkeep. "Tenants have to pick up more of the bills," says Artur Ciesielski, a Phoenix real-estate agent.

Pulled From Market

More than 4,200 units have been pulled out of the for-sale condo market and put into the rental pool in Florida's Palm Beach County alone, according to Mary Grace Breeding, president of McCabe Research & Consulting in Deerfield Beach. Those units include the 216-unit Aventine at Boynton Beach and the 450-unit Mizner Court at Broken Sound in Boca Raton, where rents range from $975 to $2,000.

Nor are so-called condo reversions limited to the Sunbelt. In Brooklyn, N.Y., two luxury condo developments converted to rental apartments last spring, including 99 Gold Street, which had begun accepting sales contracts less than a year earlier. Rentals at the 88-unit building range from $2,000 a month for 700-square-foot studios to $5,500 for two-bedroom penthouses.

Even healthy markets are beginning to feel downward pressure on rents. A disappointing employment report earlier this month and other signs of a possible recession don't bode well for landlords, since people who lose their jobs will resist paying higher rents or will move in with friends or family. Many displaced homeowners forced out by foreclosures also are doubling up, says Mark Obrinsky, chief economist at the National Multi-Housing Council.

That means that landlords are seeing what should be one of their strongest markets in years weakened by the increasing supply of unsold properties entering the rental market. "Shadow inventory is coming out and competing against us for rentals," says Richard Campo, chief executive of Camden Property Trust, a Houston-based real-estate company that owns 70,000market value. apartments. That is weakening landlords' pricing power, he says, because homeowners are less concerned about getting full

Teresa Opara tried to sell her three-bedroom home in northeast Phoenix last year but got tripped up by the credit crunch. She found a buyer willing to pay her $310,000 asking price. But at the last minute, she says, the buyer's bank changed the lending requirement. "They just said they needed more down payment," says the 57-year-old accountant. Instead, she's renting the house for $1,300 a month, which is what she needs to pay her mortgage.

In five struggling markets in Florida, average rents have actually declined since the third quarter. The Tampa-St. Petersburg area saw the largest drop. Average effective rent, which includes free rent and other landlord concessions, was $784 a month at the end of the fourth quarter, down 0.6 percentage point from the previous quarter, according to Reis. In 38 other markets, including Chicago, Boston and St. Louis, rents rose during the fourth quarter, but by less than the national vacancy growth rate of 0.9%. (The rents cited by Reis are a "blended average rent" from complexes with 20 or more units in California and Arizona and 40 or more units in the rest of the country.)

Savvy renters in struggling markets are playing landlords off each other. Ms. Evans, of Stuart, Fla., says the same day she and her husband leased their apartment for $1,150 a month, the owner of a bigger home they had looked at called to lower his asking price from $1,500 to $1,200. "If he had called earlier, we would have taken it," she says.

Trading Up

Christine Provencio, a 23-year-old legal secretary in Phoenix, considered buying a home with her fiance but instead decided to trade a $580-per-month one-bedroom for a $740-a-month two-bedroom in the same four-unit Phoenix home she has lived in for two years.

The news isn't gloomy for landlords everywhere. Rents are rising strongly and vacancies are falling in many markets, particularly those with healthy economies that haven't been affected severely by the carnage in the housing industry. Vacancy rates fell in 47 of the 79 markets tracked by Reis, and average rents saw their largest fourth-quarter increase since 2000.

In San Francisco, rents grew 2.7% in the fourth quarter to $1,761 a month. New York City, which has the highest average rent in the country -- $2,717 a month -- saw a 2% rise.

Vacant units fell by 0.9 percentage point to 5.3% in Tacoma, Wash., the biggest drop in the country. In addition, higher rates and fewer financing options for jumbo mortgages -- those bigger than $417,000 -- have kept vacancy rates high in major cities like New York and Los Angeles, where home buyers typically need jumbo loans.

Slow Correction

Housing experts predict that many would-be home buyers may be forced to rent for years because the relationship between rents and home prices are out of whack. Rents remained at around 5% of home prices throughout much of the postwar period, but beginning in 1996, home-price growth rapidly outpaced rent growth. By the end of 2006, home prices had more than doubled while average rent was up just 48%, driving down the annual rent/price ratio to 3.48%.

A study by one former and two current Federal Reserve economists suggests that home prices will have to fall by 15% over the next five years while rents increase by 4% a year to return that rent/price ratio to normal.

Wall Street Finishes Lower After Intel Earnings; Fed Report Shows Modest Economic Growth

Wall Street staggered through another volatile session Wednesday, closing mostly lower after a Federal Reserve report showed some economic growth at the end of 2007 and after Intel Corp.'s disappointing profit report.

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Stocks gave up a modest rally in the final 20 minutes of trading, continuing the fluctuations seen throughout the session as investors pored over corporate profit reports and economic news that supported varying views about the soundness of the economy.

Stocks initially gained after the Fed report -- its Beige Book survey of regional economies -- suggested economic activity increased modestly from mid-November through December, though at a slower pace than in a previous survey.

The report seemed to quell some concerns about prospects for the economy that took on fresh urgency after Intel issued disappointing earnings after the closing bell Tuesday.

The Fed's report bolstered enthusiasm among bullish investors who pointed to better-than-expected results from JPMorgan Chase & Co. and Wells Fargo & Co. The banks' reports appeared to remind Wall Street that while the fallout of souring loans was widespread, it wasn't necessarily evenly felt. Buyout news in the tech sector also gave a boost to sentiment.

"I think the market is trying to find some kind of a correction point," said Subodh Kumar, global investment strategist at Subodh Kumar & Assoc. in Toronto. "The talk on Wall Street has been about recession. Maybe the Beige Book has underscored that the U.S. is in a slowdown but that it doesn't look like a precipitous one."

The Dow Jones industrial average fell 34.95, or 0.28 percent, to 12,466.16.

Broader stock indicators also declined. The Standard & Poor's 500 index fell 7.75, or 0.56 percent, to 1,373.20, and the Nasdaq composite index finished down 23.00, or 0.95 percent, at 2,394.59.

Investors remained edgy Wednesday, particularly after a drop Tuesday that took the Dow down nearly 280 points. Predictions by some economists that a recession is at hand have rattled Wall Street in recent weeks.

Intel was by far the biggest decliner among the 30 stocks that make up the Dow and also weighed on the tech-dominated Nasdaq. The chip maker fell $2.81, or 12.4 percent, to $19.88.

Advancing issues narrowly outpaced decliners on the New York Stock Exchange, where consolidated volume came to 5.25 billion shares compared with 4.42 billion traded Tuesday.

Bond prices fell. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.74 percent from 3.68 percent late Tuesday. The yield was unchanged in after-hours trading.

The dollar fell against most other major currencies -- hitting a 2 1/2-year low against the yen -- but rose against the euro. Gold prices, which have hit record levels in recent sessions, eased.

Light, sweet crude settled down $1.06 at $90.84 per barrel on the New York Mercantile Exchange after the government reported that domestic oil supplies rose unexpectedly last week. During the session oil fell below $90 for the first time since Dec. 19.

Intel's failure to meet forecasts for the fourth quarter, along with first-quarter projections that came in at the low end of analysts' predictions, weighed on technology stocks.

The tech arena did see some cheer Wednesday, thanks to Oracle Corp.'s deal to buy BEA Systems Inc. for about $8.5 billion. BEA Systems Inc. jumped $2.88, or 19 percent, to $18.46 after word of its deal. Oracle rose 61 cents, or 3 percent, to $21.92.

Kumar contends markets will remain jumpy as Wall Street sorts out its concerns about the economy as well as the troubles with bad debt.

"Volatility will probably remain high into midyear because analyst expectations are coming down quite rapidly and we're in the eye of the storm as far as credit write-downs go for banks," he said.

Beyond the Beige Book, which arrives two weeks before the Fed's next meeting, other economic news added to Wall Street's concerns. The Labor Department also said inflation jumped by the highest amount in 17 years in 2007 amid a spike in energy and food costs. Excluding those areas, so-called core inflation remained relatively stable.

Consumer prices in December rose 0.3 percent, while core inflation showed a 0.2 percent advance. Analysts had expected both figures to rise 0.2 percent, according to Thomson/IFR.

The Fed, in setting monetary policy, is known to pay closer attention to the core rate. In any case, investors appear more worried about the prospect of slower growth than that of higher inflation.

In addition, Fed Chairman Ben Bernanke already has sent strong signals that another rate cut is on the way. The Fed's next monetary policy meeting is Jan. 29-30, though some investors have debated whether the central bank would step in and cut rates before then.

The Fed said Wednesday that output at the nation's factories, mines and utilities was flat in December. Wall Street had expected industrial production to show a 0.2 percent decline.

JPMorgan offered a first-quarter earnings report that revealed relatively light exposure to the faltering subprime loans as it booked a write-down of $1.3 billion, which was smaller than the massive losses of peers like Citigroup Inc. Citi on Tuesday said it swung to a loss of nearly $10 billion in the fourth quarter after booking a write-down of $18.1 billion for bad bets tied to the mortgage industry.

Despite its relatively strong results, JPMorgan warned of difficult conditions this year and said problems with home equity loans dented profits and underscored mounting pressures in consumer lending. JPMorgan rose $2.26, or 5.8 percent, to $41.43, while Citi, fell 70 cents, or 2.6 percent, to $26.24 after losing 7.6 percent Tuesday. Both JPMorgan and Citi are components of the Dow.

Wells Fargo revealed its first decline in profits in more than six years and also cited rising losses on home equity loans. But the bank largely sidestepped the write-downs that many others have been forced to make. Wells Fargo rose 88 cents, or 3.3 percent, to $27.37.

The Russell 2000 index of smaller companies rose 2.48 percent, or 0.36 percent, to 699.91.

In overseas trade, Japan's Nikkei gave up 3.35 percent. London's FTSE 100 finished down 1.37 percent, Frankfurt's DAX fell 1.25 percent and Paris' CAC fell 0.48 percent.

New York Stock Exchange: http://www.nyse.com

Nasdaq Stock Market: http://www.nasdaq.com

The World's Cheapest Cars

In the market for a no-frills car under $10,000? Pack your bags. For that price, you've got to travel to emerging automotive markets like India and China.

More From Forbes.com • In Pictures: The World's Cheapest Cars • In Pictures: 2008's Hottest New Vehicles • In Pictures: Cars of The Future

The Tata Nano is the latest entrant into the cheap-car club. India-based Tata Motors says the Nano will roll out later this year. Price tag? About $2,500. The four-door car will be the world's cheapest car, besting India's current cheapest vehicle, the Suzuki Maruti 800, which sells for 195,000 rupees (about $4,994).

The Maruti is the cheapest in India for now ( 195,000 Rupees; $4,994).

It costs only slightly more than the Chery QQ, which is produced in China by Chery Automotive and sells there for 34,499 yuan ($4,781). None of these vehicles are available in the United States; they are barred from entry in their current conditions, because, like the Nano, they don't meet U.S. safety and emissions standards.

"They are cars, but they are a step up from a motorcycle," says George Magliano, director of automotive-industry research for North America at Global Insights, a market research firm.

For many, though, "It is the difference between walking and driving a car."

Top Five Cheapest Cars

The Tata Nano

Suzuki Maruti

Chery QQ

Geely MR sedan

Geely HQ SRV SUV

For the complete list, please click here.

Behind The List

We searched the globe to find the world's cheapest cars. Along with the Tata Nano, Suzuki Maruti and Chery QQ, we found the Geely MR sedan, the Geely HQ SRV SUV and the Chery A1 sedan in China. Rounding out the top 10 are the HyundaiRomania. I10, Tata Indica, the Fiat Palio and the Renault Dacia Logan. All are sold in India; the Renault is also distributed in

The Maruti, a five-door hatchback, produces 37 horsepower and runs on 12-inch wheels. Four people, including the driver, can comfortably sit inside. Its top speed is 78 miles per hour and it can get 47 miles to the gallon.

The Nano is about 10 feet long and five feet wide. The two-cylinder petrol engine delivers 33 horsepower and a top speed of just over 60 mph. The basic model has no radio, air-conditioning or air bags, but it does have seat belts and a catalytic converter to reduce air pollution and gets 50 miles to the gallon. It meets all safety and emissions requirements in India.

What's more, the Nano may open the door for middle-class families in India to get behind the wheel of a vehicle for the first time, says Cody Lusk, president of the American International Automobile Dealers Association.

"That's what is happening globally," says Lusk. "There is a lot of interest and excitement that the middle class in emerging markets can get in a motorized vehicle."

U.S. consumers may feel left out, but Lusk says there is a big difference between "inexpensive and cheap." He recalls the "Yugo experiment" in 1985, when entrepreneur Malcolm Bricklin introduced to the U.S. market a low-cost vehicle built in Yugoslavia. It has the infamous distinction of being one of the worst cars ever sold in the U.S. It lacked safety features and was poorly constructed.

China manufacturer Geely Automotive tried to woo U.S. buyers with its products, which include the Merrie hatchback, a couple of years ago, but "it was not ready for prime-time," Lusk says. "It failed to meet U.S. emissions and safety standards. Geely would have to restructure and rebuild the vehicles to meet our specifications. The vehicles were less than overwhelming."

The Chevrolet Aveo, which has a base price of $10,895, is currently the cheapest car available in the United States. But two Smart ForTwo models will be nipping at its heels this quarter. That's when USA Distributor, a subsidiary of Penske Automotive Group, will begin selling the entry-level coupe for $11,590.

Wall Street Plunges As Weak Economic, Earnings Figures Stir More Concerns About Recession

A growing conviction that the U.S. is headed toward recession sent Wall Street plunging Tuesday, with weak retail sales figures and disappointing results from Citigroup Inc. exacerbating investors' pessimistic mood. The Dow Jones industrials tumbled nearly 280 points.

Investors backed away from stocks amid growing concerns that consumer spending will wane and contribute to an economic downturn. The latest evidence that consumers are retrenching came from the Commerce Department, which said retail sales fell in December while it also revised its November figures lower. Spending by consumers, which accounts for more than two-thirds of U.S. economic activity, has been key to staving off economic slowdowns in recent years.

There is also a growing fear that the Federal Reserve hasn't done enough to keep the economy going -- especially as investors continue to see the fallout from the summer's subprime mortgage crisis. Citigroup, the nation's biggest bank, announced on Tuesday a hefty $18.1 billion write-down for bad mortgage assets and slashed its dividend.

Fourth-quarter earnings reports aren't helping matters. After the close of the market Tuesday, Intel Corp.,the world's largest chip maker, posted results below projections; the company is seen as a leading indicator for the rest of the tech sector, and other companies as well.

Brian Gendreau, investment strategist for ING Investment Management, said the market is now seeing "a decisive shift" toward a recession.

"The sectors that are outperforming are defensive plays, like consumer staples," he said. "People don't buy them unless you're worried about sustained weakness."

Investors have sold stocks sharply lower so far this year on increasing worries about the economy. The Dow fell 277.04, or 2.17 percent, to 12,501.11, the latest in a string of triple-digit slides.

Broader stock indicators also lost ground. The Standard & Poor's 500 index dropped 35.30, or 2.49 percent, to 1,380.95, and the Nasadaq composite index lost 60.71, or 2.45 percent, closing at 2,417.59.

Declining issues outnumbered advancers by about 3 to 1 on the New York Stock Exchange, where consolidated volume came to 4.42 billion shares, compared to 3.51 billion on Monday.

Bond prices rose as investors fled to the safety of government securities. The yield on the benchmark 10-year Treasury note -- which moves opposite its price -- fell to 3.68 percent, close to its lowest point since March 2004 and down from 3.77 percent late Monday. The dollar was mixed against other major currencies, while gold prices rose.

Light, sweet crude fell $2.30 to settle at $91.90 per barrel on the New York Mercantile Exchange.

Tuesday's trading more than wiped out Monday's triple-digit gain in the Dow, and showed the depths of the market's pessimism. Both the Dow and S&P 500 are almost 12 percent below their early October highs, while the Nasdaq is off nearly 15 percent from its high on October 31.

A 10 percent drop from a market high is considered a correction.

Just 10 trading days into 2008, the Dow has fallen 5.76 percent, while the S&P 500 is down 5.95 percent and the Nasdaq has lost 8.85 percent.

"When consumers are beaten over the head about how bad things are, pretty soon they believe it and that affects their spending habits," said Scott Wren, equity strategist for A.G. Edwards & Sons. "And when there's a lot of uncertainty out there, the Fed needs to be a little more aggressive -- I think they need to cut more than just at this next meeting."

Still, hopes for a rate cut weren't enough to calm Wall Street.

He said the worrisome fall in retail sales, which also pressures the dollar, builds a case that the cut will be at least 0.50 percentage point. It also increases the likelihood of further cuts after the central bank's Jan. 29-30 meeting.

Adding to investors' concerns, the New York Federal Reserve's Empire State survey of regional manufacturing showed a drop to 9.03 this month from 9.80 in December.

But there was some relief about inflation. Producer prices fell 0.1 percent, according to the Labor Department. The result was smaller than the 0.2 percent drop expected by economists, but all declines in price pressure are generally good news. Excluding food and energy, producer prices gained 0.2 percent, matching expectations.

Financial services stocks were among the biggest influences on investors during Tuesday's session. Citigroup's drastic efforts to shore up its balance sheet had been widely expected, but it still was a forceful reminder of the serious problems that bad lending practices have created for financial services firms.

Citigroup, which lost $9.83 billion in the fourth quarter, also announced a massive $12.5 billion capital injection. Hope that struggling banks will bolster their finances was also stirred after Merrill Lynch & Co. Inc. said three foreign investment funds agreed to invest $6.6 billion.

Citi fell $2.21, or 7.6 percent, to $26.85. Merrill -- which reports results on Thursday -- fell $2.96, or 5.3 percent, to $53.01.

Intel plunged in after-hours trading after also saying sales in the current period would come in slight below expectations. The stock, which closed at $22.69, down 39 cents, in regular trading, skidded to $19.84 in later dealings.

The Russell 2000 index of smaller companies fell 15.05, or 2.11 percent, to 697.43.

Overseas, Japan's Nikkei stock average fell 0.98 percent. Britain's FTSE 100 closed down 3.06 percent, Germany's DAX index fell 2.14 percent, and France's CAC-40 lost 2.83 percent.

New York Stock Exchange: http://www.nyse.com

Nasdaq Stock Market: http://www.nasdaq.com

Economic Calendar for week 14th - 18th January 2008

All times GMT

Monday Jan 14th:

FR - 07:45 - CPI M/M.
UK - 09:30 - PPI Input & PPI Output M/M.
EU - 10:00 - Industrial Production M/M.

Tuesday Jan 15th:

UK - 09:30 - CPI & Core CPI Y/Y.
GE - 10:00 - ZEW Economic Sentiment.
EU - 10:00 - ZEW Economic Sentiment.
US - 13:30 - Retail Sales & Core Retail Sales M/M.
US - 13:30 - PPI & Core PPI M/M.
US - 13:30 - Empire State Business Conditions Index.
US - 15:00 - Business Inventories M/M.
UK - 21:30 - RPI Y/Y.

Wednesday Jan 16th:

UK - 09:30 - Average Earnings Index +Bonus Q/Y.
UK - 09:30 - Claimant Count Change.
UK - 09:30 - Unemployment Rate.
EU - 10:00 - CPI Y/Y.
US - 13:30 - CPI & Core CPI M/M.
US - 14:00 - TIC Net Long-Term Transactions.
US - 14:15 - Industrial Production M/M.
US - 14:15 - Capacity Utilisation Rate.
GE - 15:00 - CPI M/M.
US - 15:30 - Crude Oil Inventories.
US - 18:00 - NAHB Housing Market Index.
US - 19:00 - Beige Book.

Thursday Jan 17th:

EU - 09:00 - ECB Monthly Bulletin.
EU - 10:00 - Trade Balance.
US - 13:30 - Housing Starts.
US - 13:30 - Building Permits.
US - 15:00 - Philadelphia Fed Manufacturing Index.

Friday Jan 18th:

UK - 09:30 - Retail Sales M/M.
US - 15:00 - Consumer Sentiment.
US - 15:00 - Leading Index M/M.

EU - Europe wide
FR - France
UK - United Kingdom
US - United States
GE - Germany

The week ahead.

Global stock markets continued their downwards trajectory last week, but losses were not of the same magnitude as last weeks blood letting. After limping over the line to end last year in the black; the S&P 500, FTSE and French CAC are now below their opening levels from 2007. The German DAX remains one of the best performing indices relatively, though this is partly a function of it being a performance based index that includes dividends in its calculations.

Fed Chairman Ben Bernake, reassured Wall Street on Thursday that the Federal Reserve would be proactive to resuscitate the faltering US economy. This sparked a late rally in US equities on the day, as the S&P 500 stemmed some of the heavy selling that had hit equities around the New Year period.

Credit markets received a boost following Wednesdays comments from a Berkshire Hathaway executive that Warren Buffets organisation would not be averse to acquiring a bond insurer. US Financial stocks made a recovery towards the end of the week on news that Bank of America might acquire the ailing Countrywide Financial Corp., the unprofitable US mortgage company.

Currency markets saw some strong action on the back of the MPC and ECB announcements. As expected, the ECB kept rates the same, and many had already predicted Trichets tough talk on inflation. Speculation had increased that the Bank of England might cut rates this month, but retailers and banks were left disappointed as rates were left unchanged at 5.5%. The news sent the pound spiralling further against the Euro, closing above 1.75 for the first time since the launch of the single currency.

This week sees a large number of upper and middle tier economic announcements. On Tuesday, UK CPI figures will influence Sterling, as economists assess the likelihood of a MPC rate cut in February. The Bank of England held back on cutting rates last week due to inflation concerns, but poor CPI data on Tuesday, below expectation earnings inflation on Wednesday, and a potential slump in retails on Friday could force their hand at the next meeting.

Since the start of the year, expectations for half point cut in US interest rates have increased by the day. Last week, Federal Reserve Chairman Ben Bernake spoke of substantive additional action to insure against downside risks to economic growth. According to Fed Futures markets a half point cut is the more probable course of action at the month end meeting. All eyes will be on Tuesdays retail sales data, Wednesdays CPI & Industrial production numbers, and Fridays consumer sentiment figures. If the figures are below expectations it could signal a half point cut as being even more likely.

Given the data heavy week ahead and the continuing gyrations of equity markets, continued volatility could be a feature for the remainder of January. The VIX options volatility index is still below its August and November peaks.

A double touch trade returns a profit if both of two predetermined levels are touched. A small interest in a Double Touch trade with the two levels set as 1393 and 1422 on the S&P 500 could return 50% over 19 days. This means that the market has to touch both these levels at least once for you to win.

David Evans

Economic Calendar for week 7th - 11th January 2008

All times GMT

Monday Jan 7th:

EU - 09:30 - Sentix Investor Confidence.
EU - 10:00 - PPI M/M.
EU - 10:00 - Consumer Confidence.
EU - 10:00 - Unemployment Rate.

Tuesday Jan 8th:

New Year's Day:

EU - 10:00 - Retail Sales M/M.
UK - 11:00 - BRC Retail Sales Monitor Y/Y.
GE - 11:00 - Factory Orders M/M.
US - 15:00 - Pending Home Sales M/M.
US - 20:00 - Consumer Credit M/M.

Wednesday Jan 9th:

UK - 00:01 - Consumer Confidence Index.
GE - 07:00 - Trade Balance.
FR - 07:45 - Trade Balance.
EU - 10:00 - GDP Q/Q.
UK - 10:30 - BRC Shop Price Index Y/Y.
GE - 11:00 - Industrial Production M/M.
UK - 15:30 - Leading Index M/M.
US - 15:30 - Crude Oil Inventories.

Thursday Jan 10th:

EU - 07:45 - Industrial Production M/M.
FR - 07:45 - Government Budget Balance.
UK - 09:30 - Trade Balance.
UK - 12:00 - Interest Rate Statement.
EU - 12:45 - Interest Rate Announcement.
EU - 13:30 - ECB President Trichet Speaks.
US - 13:30 - Unemployment Claims.
US - 15:00 - Wholesale Inventories M/M.

Friday Jan 11th:

UK - 09:30 - Industrial Production M/M.
UK - 09:30 - Manufacturing Production M/M.
US - 13:30 - Trade Balance.
US - 13:30 - Import Price Index M/M.

EU - Europe wide
FR - France
UK - United Kingdom
US - United States
GE - Germany

The week ahead.

While the medias focus continues to be on the mortgage and credit crisis, oil has quietly been making its way back up to $100 per barrel. Oil has already passed its inflation adjusted peak of $80. If oil continues to rise, it will be more expensive that at any other time in history in real terms.

The direct effects of this will be felt by the already badly beaten consumers who have for years supported the US and UK economy at the expense of their savings, then house equity and now credit cards. There is a huge concern that this latest rise might be the final straw for consumers in a slowing economy.

Fridays rout was almost a perfect storm. US Payroll numbers were below expectations and unemployment rose from 4.7% to 5%. Recently bad news has sometimes been good news for the stock market because of the possibility that interest rate cuts might follow. Unfortunately, Fridays bad news really was bad news. It has increased the likelihood of further cuts to US interest rates, but the Fed may be limited in how far they can go due to the inflationary effects of a high oil price. With inflating commodity prices and a potentially deflating economy, the sellers were out in force.

The first hint of this was the US Institute for Supply Management's (ISM) report that stated that the manufacturing index fell to 47.7 percent for December from 50.8 percent in November. This sparked concerns that the economy could be slowing at a quicker pace than some investors had estimated. A reading below 50 can signal economic contraction, whereas readings over 50 can indicate expansion.

Last week the US Dollar fell heavily against the Yen and safe heaven currencies such as the Swiss Franc. It was recently reported that the Dollars % share of foreign currency reserves has dropped at the expense of the Euro, though selling of the Dollar/ Euro exchange rate was relatively moderate on Friday compared to the falls in US equities.

Aside from US existing home sales on Monday, it is a relatively quiet start to next week, but momentum quickly builds in the final two days with both the UK and European central banks releasing their interest rate decisions. The ECB is widely expected to announce a no change verdict. The Bank of England is also expected to keep rates the same, but this is less certain and a quarter point reduction is still possible.

Friday saw some of the heaviest selling since the credit crisis broke with the S&P 500 now down 3.86% for 2008 with just 3 trading says gone. The Nasdaq Composite has been the worst hit so far and is down 5.6% in the 3 trading days of the new year. The Nasdaq 100 and broader Composite are the only major indices aside from the Nikkei to be trading below their November lows. The Semiconductor sector, full of stocks like Intel appears to be weighing heavily on the high tech markets.

According to research from Bespoke Investments and Sentimentrader.com; last week was the 2nd worst three day start to the year ever on the S&P 500, the fourth worst on the Dow and worse ever for the Nasdaq. However, the big question of course is what this means for the future. According to the aforementioned research, a terrible start for the year may not mean that 2008 is automatically a write off. When the S&P 500 has stumbled out of the gate in the past, it gained an average of 2% over the balance of the month and 10% the rest of the year.

Oil is close to $100 per barrel but according to a Bloomberg survey of commodity analysts, the average expectation is for oil to be lower from this point forward. This could possibly be a function of lower US growth creating lower demand for energy.

The VIX fear index is still below its November peak, which indicates that there may be more downside to come, however this could fall short of the all out capitulation many fear.

Therefore, a No Touch lower trade may be the better option for the rest of the month on the S&P500. The worst performance for the rest of the month following similar opening drops was -3% back in 1978. A No touch level set 6.5% below Fridays closing price (1320) could return 11% over 30 days.

David Evans

Stocks Drop on Weak Manufacturing Report

Stocks Pull Back After Weak Manufacturing Reading, Rising Oil Prices Stir Unease

NEW YORK ->Wall Street skidded lower Wednesday after a weaker-than-expected reading on the manufacturing sector and a spike in oil prices to $100 a barrel triggered concerns of a further slowdown in the overall economy.

The major indexes each lost more than 1 percent, with the Dow Jones industrials giving up more than 200 points. It was the blue chip index's biggest point decline for the first day of trading in a new year.

The Institute for Supply Management's report that its manufacturing index fell to 47.7 percent for December from 50.8 percent in November raised concerns that the economy could be slowing at a quicker pace than some investors had estimated. The reading below 50 signals economic contraction, whereas readings over 50 indicate expansion.

Analysts polled by Thomson/IFR had anticipated that manufacturing would expand modestly in December.

Light, sweet crude rose $3.64 to $99.62 per barrel on the New York Mercantile Exchange after earlier hitting $100 for the first time. The rise follows violence in the oil-producing nation of Nigeria, concerns about weather-related production halts in Mexico and speculation that inventory figures will show drops in levels of U.S. supplies.

The economic reading and rising oil prices were unwelcome for investors wading into the first trading session of 2008 and indicated the concerns that weighed on stocks in the second half of 2007 will for now persist.

"It certainly is a soft number and the declines in production and new orders are eye-catching," said Alan Levenson, chief economist at T. Rowe Price Associates Inc. "Overall, the ISM has generally been a decent guide for the economy. This is a sharp decline in one month."

Stocks failed to gain momentum after an initial bounce after minutes from the Federal Reserve's last meeting. Central bankers, who voted to cut interest rates a quarter percentage point, called the economic outlook "unusually uncertain." While that strengthened the case for lower rates, it also confirmed some of the market's worst fears about the economy.

The Dow fell 220.86, or 1.67 percent, to 13,043.96. The blue chips briefly fell below 13,000 for the first time since November.

Broader stock indicators also fell sharply. The Standard & Poor's 500 index slid 21.20, or 1.44 percent, to 1,447.16, and the Nasdaq composite index fell 42.65, or 1.61 percent, to 2,609.63.

Bond prices surged after the ISM report. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.89 percent from 4.03 percent late Monday. It rose to 3.91 percent in after-hours trading.

The dollar was mixed against other major currencies, while gold prices reached a 28-year high.

Declining issues outnumbered advancers by about 4 to 3 on the New York Stock Exchange, where consolidated volume came to 3.32 billion shares, up from 2.38 billion on Monday.

The weak manufacturing reading came as Wall Street entered 2008 still uneasy over the economy, specifically the state of the housing market and tightness in the credit markets brought on by fears of faltering mortgage debt. In addition, the health of the consumer is again in focus as investor are awaiting the government's December employment report, due Friday.

Investors weren't swayed by the release of the Fed's minutes from its Dec. 11 meeting. Central bankers cut rates amid worries about housing, credit and financial markets -- and kept all their options open for their next move, according to the minutes.

"We didn't really learn anything new," said Ryan Larson, senior equity trader with Voyageur Asset Management. "The Fed continues to be stuck between a rock and a hard place in terms of fighting inflation and managing U.S. growth."

The arrival of the new year was accompanied by a return of more of Wall Street's regular players. The recent weeks surrounding the holidays have seen light trading volume, making it hard to draw any meaningful reading on the market's mood. Moves higher or lower tend to be exaggerated amid light sessions.

In corporate news, National City Corp. fell 87 cents, or 5.3 percent, to $15.59 after halving its dividend and shutting down its wholesale mortgage business. The move, which eliminates 900 jobs, comes amid continued weakness in the housing and credit markets.

Chip stocks fell after Bank of America issued a bearish assessment for the sector. Intel Corp. fell $1.31, or 4.9 percent, to $25.35, while Advanced Micro Devices fell 36 cents, or 4.8 percent, to $7.14.

Amazon.com Inc. gained $3.61, or 3.9 percent, to $96.25 after Citi Investment Research raised its rating on the online retailer.

The Russell 2000 index of smaller companies fell 12.48, or 1.63 percent, to 753.55.

Overseas, Germany's DAX index fell 1.47 percent and France's CAC-40 lost 1.14 percent.

New York Stock Exchange: http://www.nyse.com

Nasdaq Stock Market: http://www.nasdaq.com

Economic Calendar for week 2th January 2008 - 4th January 2008

Wednesday Jan 2nd:

GE - 08:55 - Manufacturing PMI.
EU - 15:00 - Manufacturing PMI.
UK - 09:30 - Manufacturing PMI.
US - 15:00 - ISM Manufacturing Index.
US - 15:00 - ISM Manufacturing Prices.
US - 15:00 - Construction Spending M/M.
US - 19:00 - FOMC Meeting Minutes.

Thursday Jan 3rd:

GE - 08:55 - Unemployment Rate.
EU - 09:00 - M3 Money Supply Y/Y.
UK - 09:30 - Construction PMI.
US - 13:30 - ADP Nonfarm Employment Change.
US - 13:30 - Unemployment Claims.
US - 15:00 - Factory Orders M/M.
US - 15:30 - Crude Oil Inventories.

Friday Jan 4th:

GE - 08:55 - Services PMI.
EU - 09:00 - Services PMI.
UK - 09:30 - Services PMI.
UK - 09:30 - M4 Money Supply M/M.
UK - 09:30 - Net Lending to Individuals M/M.
UK - 09:30 - Mortgage Approvals M/M.
EU - 10:00 - CPI Y/Y.
US - 13:30 - Nonfarm Employment Change.
US - 13:30 - Unemployment Rate.
US - 13:30 - Average Hourly Earnings M/M.
US - 13:30 - ISM Non-Manufacturing Index & Prices.
US - 16:15 - Fed Governor Kohn Speaks.

EU - Europe wide
FR - France
UK - United Kingdom
US - United States
GE - Germany

The week ahead.

Last week, global equity markets mostly finished flat with a negative tinge going into the final trading day of 2007. In contrast, there were significant movements on the major currency pairs. The Dollar was under pressure across the board as Sterling recovered strongly from losses earlier in the week and the Euro had another good week against the Dollar.

The US Dollar wasnt the only unwanted item over the Christmas week as the Pound fell to fresh lows against the Euro. The fall came on the back of last weeks heavy selling, pushing the pair further towards the psychologically important 0.75 level. Using synthetic levels based on previous Deutsche Mark data, the rate may still have some way to go with the synthetic pair touching 0.90 in 1995.

The Euro benefited from a flight to safety last week on renewed concerns for global security following the assassination of former Pakistan president Benazir Bhutto. Pakistan is a key US ally in the war against terror, therefore the countrys internal struggles have a significant impact on the global stage.

The Euro, Gold, US treasuries and the Swiss Franc were all in demand as investors sought safe havens. Oil was also in play after last weeks data showed US reserves were less than expected.

UK house prices displayed further signs of weakness, dropping in consecutive months for the first time in seven years. According to the Nationwide Building Society, UK house prices dropped in both December and November, representing the first month on month fall in average prices since August 2000. The Quarterly rate of growth also fell from 1.4% to 0.9%.

In a reminder of how quickly sentiment can change, Case-Schiller Median house price data showed that the US housing market is continuing its dramatic reversal. Octobers data showed that all 20 cities tracked were down on a month-to-month basis. The 10 city index showed a 6.7% year on year decline, the worst fall in the indexs history.

The FTs Lex column recently highlighted an International Monetary Fund study that found that house price busts though less frequent tend to last twice as long as equity market busts (5 rather than 2 years), and are associated with capital losses twice as large (8% of GDP).

Next week there is little respite from the house price merry go round with US existing home sales data on Monday and the release of the last FOMC meeting minutes on Wednesday. The next meeting at the end of January is expected to produce another quarter point cut, but this still isnt a done deal according to analysts.
Other top tier announcements next week include US Non Farm Employment data and the Unemployment rate on Friday. Both of these could have a significant impact on equity and currency markets in the first week of the new year.

Given the uncertainty over the US housing market and the possibility that there may be a few more years in the property bear market, a trade on the US dollar could be profitable. Given its supposed safe haven status, the Swiss Franc could continue to strengthen against the US Dollar and recover some of the ground lost in November. A Long term No Touch trade on the USD/ CHF (Swiss Franc) not to touch 1.236 over the next 180 days returns 10%.

David Evans