ECB Interest Cut Seems Likely Today

Growing doubts over the health of global economies pushed Asian stocks lower on Thursday, after disappointing U.S. 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. It is expected to cut interest rates down to a low of 0,5% in an effort to take the eurozone 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. However, it is fragile and has lost momentum due to signs of pausing in the U.S. economy. Market sentiments are split between growth prospect worries and support for sustained monetary stimulus.

There are also worries that a weaker U.S. economic growth may prompt profit taking in Asian equities. Asia outperformed strongly earlier this year. The USD/JPY is trading steady at 97.24, unable to break through the psychologically important 100 level. Some analysts expect that the yen is will continue to depreciate after a short breather. The forecast for U.S. trading is 110 yen towards a dollar

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 steadily at around 1.3178 in Asia's opening sessions. Weak credit demand in the euro zone will most likely lead to further contraction in the region. This coincides with disappointing German PMI in April, pointing towards an interest rate cut when the ECB meets later today.

Growing unemployment in Southern Europe and slower growth in Germany, has led to a renewed debate on the austerity measures carried through by the ECB, and Germany as the driving EU engine. A leading critic of the austerity measures, economics Nobel laureate, Paul Krugman, recently said that austerities are far from any sound economics, and are purely dictated by leading bankers and political prejudices. The results are catastrophic for the economy as well as human beings.