Retail sales growth in the UK almost stalled in February as consumers cut back on spending, figures from the Office of National Statistics show. Sales growth slowed to 0.4% last month, the smallest increase since 1995, after a 3.6% rise in January. Analysts had expected retail sales growth to slow to 2.5%.

Pound Sterling - UK Markets

The UK Treasury has failed to sell all its government bonds in an auction for the first time since 2002. The Debt Management Office has said that the Treasury wanted to sell £1.75bn of 40-year bonds, but investors only bid for £1.63bn of the debt. Analysts said this may reflect concern over the state of the public finances as government borrowing surges.

Meanwhile, the UK February Retail Sales Report has seen the Pound decline against the US Dollar.

US Dollar - US Markets

In a quiet day for US data, Treasury Secretary Timothy Geithner has defended the Dollar as the world reserve currency, a day after China called for it to be replaced. Pointing to the ongoing global financial crisis, China’s Central Bank governor, Zhou Xiaochuan called for a new reserve currency run by the International Monetary Fund.

Euro – European Markets

Following yesterday’s report that showed dire figures about German business confidence, German consumer confidence has declined for the first time in seven months. Workers are increasingly worried about keeping their jobs amid the worst recession since World War II, GfK AG’s confidence index for April shown.

According to the Dutch Central Bureau for Statistics, the Dutch economy shrank 0.6% on the year in the fourth quarter. In line with estimates, the Dutch economy in the fourth quarter contracted 1% from the previous quarter, according to the second estimate, which is a downward revision of 0.1 percentage point compared with the first estimate.

Spanish new housing starts fell 42% last year as a decade-long housing boom went bust, data from the country’s Housing Ministry has shown. Housing starts fell to 360,044 last year, from 615,976 in 2007. The resulting decline in housing investment pushed the wider Spanish economy into recession at the end of last year.

A report from Statistics Denmark has said the Danish seasonally adjusted jobless rate climbed to 2.5% last month from 2.3% in January. The figure, which is in line with forecasts, shows that Denmark’s unemployment rate rose in February for the fifth straight month. Denmark’s jobless rate has climbed steadily since September, when it was 1.7%.

Italian business confidence continued to fall in March, staying at its lowest level since records began in 1991, with recent bankruptcies painting a bleak outlook for the economy and exports, research centre ISAE has said.

ISAE said March business confidence in the Eurozone’s third-largest economy fell to 59.8 from 63.2 in February, well below expectations. A survey of 12 economists polled by Dow Jones Newswires forecast Italian business confidence at 62.7. In the report Thursday, ISAE said sentiment in the consumer goods sector fell to 72.1 from 76.8, while investment goods sentiment slid to 56.5 from 58.7.

Following these somewhat bleak reports, the Euro weakened against its major counterparts, before bouncing back slightly against the Swiss Franc.

Other Currencies - Highlights

The Shekel-US Dollar exchange rate rose 1% in morning inter-bank trading and the Shekel-Euro exchange rate rose 1.68% after the Bank of Israel announced yesterday evening that it would continue to buy US Dollars.

Gordon Brown will repeat calls for greater fiscal stimulus and more financial regulation on a visit to the US as part of his pre-G20 summit tour. The prime minister’s strategies for reviving the economy appear to have been broadly backed by US President Barack Obama. Brown is touring three continents ahead of next week’s G20 summit, calling on governments to back plans for possible further stimulus action.

Pound Sterling - UK Markets

Answering questions from MPs at a Treasury committee meeting, Mervyn King, the governor of the Bank of England, has warned against further significant government spending to stimulate the economy. Given the high levels of UK debt as a result of recent stimulus packages, Mr King questioned the wisdom of increasing debt by spending more.

Following yesterday’s surprise jump in British consumer price inflation to an annual rate of 3.2 percent, Sterling fell against the US Dollar and Euro, giving back some of the previous session’s gains as investors reconsidered the unexpected rise in inflation.

US Dollar - US Markets

Barack Obama has told Americans he sees signs of economic recovery, but has urged them to be patient and look beyond their “short-term interests”. The US president said his draft budget would build a stronger economy which would mean America did not face a repeat crisis in 10 or 20 years. Obama’s $3.6tn budget faces its first tests in Congress this week.

Orders for US durable goods are predicted to have fallen in February for a seventh straight month as the global slump in business spending deepened, economists said before the release of data from the US Commerce Department today.

Bookings for goods meant to last several years decreased 2.5%, according to the median forecast of economists surveyed by Bloomberg News, after dropping 4.5 percent in January. A report on new-home sales, also from the Commerce Department, is anticipated to show sales of new houses declined to the lowest level on record.

Euro – European Markets

Germany’s Munich-based Ifo Institute for Economic Research released a German business confidence survey earlier today. The business confidence index has dropped to a historical low of 82.1 in March from 82.6 in February. The Euro has now gained slightly against its major counterparts.

According to research centre ISAE, Italian consumer confidence fell more-than-expected in March as households’ view of the overall economy and employment opportunities slipped. ISAE said the seasonally adjusted consumer confidence index for Europe’s fourth-largest economy dropped to 99.8 from 104 in February, returning to levels last seen at the end of 2008.

ISAE said consumers’ expectations of their overall economic situation fell sharply to 62.1 from 70.4, while views on rising unemployment increased to 115 from 97. Views on their personal situation dropped to 118.3 from 120.7.

Other Currencies - Highlights

Japan’s exports saw a record plunge in February, falling by nearly half compared with a year earlier, according to the country’s finance ministry. In line with forecasts, exports fell 49.4% year-on-year to 3.526tn yen ($36bn; £24.6bn). This data comes after figures for January showed year-on-year exports nearly halved that month as well.

The South African Rand was softer against the US Dollar in early trade today, moving back into the 9.50s, as some nervousness about global stock markets returned to the markets.

So another rate cut by the Bank of England to the lowest ever in its 315 year history; quite something!

The next couple of years will tell us whether these cuts will work or not, but it does seem in the short-term to be counter productive.  Retail banks are not lowering their mortgage rates because the LIBOR rate is too high, and the lowering of interest rates greatly affects savers at the very time when the government is asking us to save more!  Therefore it is questionable as to who it helps in the short term.  VAT has been reduced, but on the typical item of clothing, say at £30, this is hardly putting money back in people’s pockets.

There are even suggestions that the government will have to “expand the money supply”, which to you and me is printing more money and potential inflation.  If this happens, the question that follows is who gets this new printed money?  It’s our old friends the banks of course.  The government will buy assets in the banks in exchange for newly printed money.  However, I am pretty sure that was what happened in the recent bank bailout, no?

Ultimately, there may well be a shift in consciousness here.  We have been living in a false economy for some time built on credit that doesn’t seem to exist.  “Where has all the money gone” seems an apt question right now.  With debt levels so high, the money supply may have naturally contracted with the increasing payments people need to make.  The only action that may be logically left for the government is to increase the money supply to make up for the shortfall.  However, we are walking into an inflation minefield, the one the current Prime Minster said would never happen again.

I believe we need a mentality shift away from credit, and until drastic action is taken, such as cancelling large percentages of debt, the current problems may well persist.