MARKET REPORT TUESDAY 4^th MARCH

Good Morning,

On Monday the commodities markets saw Oil hitting a record level above $103 per barrel and Gold edging towards new highs close to $1000 per ounce. The spot index commodities prices rose to the highest level since the index was created in 1956. According to UK Manufacturing figures released on Monday, manufacturers pushed up prices at the fastest rate on record in February, as sector growth increased and input costs soared at the strongest pace in 3 years. The figures released by the Chartered Institute of Purchasing and Supply, suggest strong inflationary pressures in the UK which may in turn prevent the Bank of England from cutting interest rates a head of Thursday’s MPC rate decision.

Yesterday the UK’s largest bank, HSBC, posted a 10% increase in annual pre-tax profits of $24.2bn, amidst further losses in the wake of the US sub-prime crisis, totaling $17bn (£8.7bn). HSBC is the last of the UK’s “big-five” banks to report results

Today the £ / Euro opened at the 1.3075 level, the £ / US opened at 1.9865 and the £ / AED at 7.2860

The Reserve Bank of Australia increased rates by 0.25%, however rather than strengthening the AUD the accompanying statement was considerably more dovish than anticipated. Despite higher commodities prices benefiting the Australian economy, weakening retail sales points towards a moderation in domestic demand and thus the reason for the dovish comments.

Today’s market focus will be on announcements from the Euro Zone released at 10:00 (GMT) on Producer Price Data for January - the market is looking for an increase of 0.8%. European GDP data for the fourth quarter is due out at 10:00 (GMT), forecast to rise 0.4% pushing yearly growth rate to 2.3%. If growth in the EU fails to slow as some analysts have suggested it is likely to reduce the probability of rate cuts later this year as the ECB battles with rising inflation that is already above target.

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