Monday 15th December

Little New Data out over the Weekend …….

… and so most column inches were taken up with re-hashing old news. The automotive and aviation industries obtained most coverage with expectations that the bail-out of the Big 3 US car manufacturers will be looked at again early in the week and re-presented for approval whilst there is a lot of talk afoot that funds will be made available for the UK car industry from Government. The large aircraft manufacturers appear to be heading down a different route with anticipation rife that they will offer billions of dollars of loans to ‘buyers’ in order that the sector remains active.

This week looks as though it could be lively given both the illiquidity of the markets as we approach Xmas added to Tuesday’s FOMC meeting in the US plus the release of this month’s MPC meeting minutes on Thursday. Expectations are that the Fed will cut rates by at least 50bp but interest will centre on additional measures and/or comments that might accompany the decision. A new dimension will be added to the Sterling saga if, as the Sunday Times pontificates, the strength of the pound is beginning to carry weight with regards to cutting rates. This argues that given the current level of GBP/EUR, cuts in the 1st Qtr 09 might not be quite as frequent or of the same magnitude as over the last 3 months.

Predictably hawkish comments from 2 ECB members, Stark and Trichet will not help the outlook for Sterling/Euro.

Today we have only US industrial production and capacity utilisation scheduled for release and you wouldn’t get a Nobel Prize for predicting that the numbers might not be so good. Otherwise we await developments on the car company bail-out.

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