ECB interest cut seems likely today

Growing doubts over the health of global economies pushed Asian stocks lower on Thursday after disappointing US economic data pushed Wall street down. Dow Jones industrial fell 0,92 % adding to doubts over the strength of the world’s biggest economy. Slow Chinese demand puts new question marks on China’s economic recovery. The European Central Bank (ECB) is meeting later today. ECB is expected to cut interest rates down to a low of 0,5 % in an effort to take the Euro zone out of recession.

The Asian Pacific MSCI-index fell 0,5 percent with Australian shares leading the decline. Miners dragged the AXJO index down 0,8 % on fears of lesser Chinese appetite for commodities. The Chinese PMI (Purchasing Managers index)fell in April, but the upward trend continues. It is, however, fragile and has lost momentum due to signs of pausing in the US economy. Market sentiments are split between growth prospect worries and support for sustained monetary stimulus.

There are also worries that a weaker US economic growth may prompt profit taking in Asian equities.  Asia has strongly outperformed earlier this year,  US/jpy is trading steady at 97,24 unable to break through the psychological important 100 level.  Some analysts expect that yen is going to continue to depreciate after a short breathier.  A US trading at 110 yen towards a dollar is perceived.

The dollar has recovered from lows against a basket of six major currencies, DXY, but stayed at lowest levels since late February. The dollar weakness lifted the euro to a two month high of USD 1,3243 on Wednesday. It trades steady around 1.3178 in the opening sessions in Asia. Weak credit demand in the euro zone shall most likely lead to further contraction in the region. This points along with disappointing German PMI in April towards an interest rate cut when ERCB meets later today.

Growing unemployment in the Southern European periphery of Europe and slower growth in Germany, have led to a renewed debate on the austerity measures carried through by The ECB and EU-commission with Germany as the driving national engine. A leading critics of the austerity measures, the economic Nobel laureate, Paul Krugman, says  in a recent article that the austerities is far from any sound economics and purely dictated by leading bankers and politicians political prejudices. The results are catastrophic for the economy as well as human beings.

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