More of surprises would be desired this week if the sentiment is about to drive markets higher as a correction signaled on Friday has accelerated. Market started on a defensive note already in Asia after Geithner’s remarks of “still significant help needed in a banking sector”. What’s more, market is about to digest another part of car manufacturers’ troubles saga. Receiving loans from the US government they were obliged to work intensively on restructuring and show some signs of improvement till the end of March. This is not likely to happen and already the head at GM has been replaced. As a result we saw 35 point decrease on the S&P500 futures contract which drove EURUSD through a support at 1,3410 and subsequently to as low as 1,3180 with a potential to test a 1,30 support. This in turn caused increased nervousness on the emerging market currency segment. Profit taking has taken place also on the industrial segment of commodities.

While the S&P500 has still some room to match the size of a previous growth correction  (ended on January the 6^th), market will need some good news to get there. This week is abundant with potential turning points. We have scheduled important macro data – activity indices (Wednesday industry and Friday services) and labor market data (ADP on Wednesday and payrolls on Friday). On top of that Thursday will bring an interest rate decision taken by the council of ECB (a cut of 50bp is expected) and G20 summit starts in London. The first one may be important for the EURUSD, while the second may influence overall market sentiment. The week finishes with Bernanke’s speech on Friday afternoon.

Przemysław Kwiecień Chief Economist