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The coming week finds the bulls chastened by last week’s dip and facing a slew of data that could swing sentiment further into despair — or back toward euphoria. Which way the market’s mood swings could come down to the state of the all-important consumer, to be revealed in both confidence numbers and earnings reports from several retailers.

On the top-down front, Tuesday brings the February consumer confidence report, from which economists expect a dip to 109.5 from January’s 110.3, the highest level in over four years.

“The combination of the nasty winter storms blanketing most of the nation during February and the political discord over [Iraq] should drive down consumer confidence a bit for the month,” writes Joseph Brusuelas, chief U.S. economist at IDEAglobal. “The reduction in work available due to winter-related disturbances and the diminution in new orders within the manufacturing sector should [also] take the edge off … consumer optimism.”

From the bottom’s-up perspective, the coming week brings earnings from a diverse group of retailers. Results from discount giant Target (TGT) and department store stalwarts Federated (FD) and Kohl’s (KSS) will provide the broadest insights on the state of the U.S. consumer.

Meanwhile, investors will be looking for signs of whether the better-than-expected January same-store sales at Gap (GPS) were anomalous or indicators of better times.

Arguably, the most important report comes from Nordstrom (JWN) , whose stock is up over 60% in the past six months and has more than doubled over the past two years. Nordstrom is a leader in a luxury segment that, to date, has suffered no ill effect from a housing slowdown that has crippled comparable homebuilders such as Toll Brothers (TOL) .

Nordstrom’s results take on added importance because while the U.S. economy is driven by overall consumer spending, said spending is increasingly driven by high-end consumers.

“From a macro perspective, the income distribution has become more uneven in recent years, suggesting that low-income households account for a smaller share of total consumer spending than they used to,” writes Torsten Slok, senior economist at Deutsche Bank. “The share of income received by the wealthiest 20% of the population has been rising steadily … from 43% in 1973 to over 50% in 2005. The share of income received by the poorest 20% of the U.S. population has declined since 1970 from 4.1% of income to 3.4% most recently.”

Such statistics help explain why most economists and Federal Reserve officials are less alarmist than the press about recent subprime problems, most recently evidenced by NovaStar Financial’s (NFI) implosion last week.

Indeed, the subprime space is only a “sliver” of the overall mortgage market, Fed Governor Susan Bies said Tuesday. Furthermore, spending by the increasingly less important (from a macro perspective) low-end consumer is unlikely to be materially damaged by problems in the subprime sector “as long as unemployment remains fairly low,” according to Slok.

(On a jobs-related note, February nonfarm payroll data will be released on the second Friday in March, rather than the first as is typical, because February is a short month and the government needs extra time to get it “right” — before subsequent revisions, of course.)

“There is not at this time a major systemic risk due to the subprime issue, nor should the problems in this corner of the mortgage universe spill over into the broader economy,” writes Brusuelas. “Rather, we feel that an unwise policy response among regulators and the political class in Washington poses a far greater risk.”

There is evidence of tightening lending standards by banks, presumably at the behest of the Fed and other regulators, which could hurt the economy. Of course, bears such as Doug Kass believe the subprime “fungus” will absolutely spread into the prime mortgage market, extend the housing downturn and ultimately cripple (or certainly crimp) the broader economy.

Given the presumed significance of the housing market on consumer sentiment and spending, bull and bear alike will certainly be paying close attention to Tuesday’s existing-home and Wednesday’s new-home sales reports.

Also, Tuesday’s durable goods report and Wednesday’s ISM Manufacturing Index will give fresh insight into the manufacturing sector, which has experienced a noticeable slowdown of late.

Speaking of slowdowns, Wednesday’s preliminary fourth-quarter GDP report is expected to show growth of 2.3% vs. the 3.5% advance reading. The report “will take a bit of the bloom off of the roses that the Fed has tossed to the market recently,” writes Brusuelas. “Given the fact that core inflation remains a bit sticky, even with the sub-trend growth that we expect to characterize the first half of 2007, we do not anticipate any Fed action for some time.”

Lowered prospects for rate cuts help explain the market’s dip last week. As detailed here, Wednesday’s stronger-than-expected CPI report undermined, at least temporarily, the Fed’s forecast for slowing core inflation. This Thursday brings the personal income report for January and the accompanying core personal consumption expenditures index. Given that the core PCE is presumably the Fed’s preferred inflation indicator, the report could prove to be most critical in a week chock full of events with market-moving potential. Notes, Notables & Fearless Predictions

Beyond the data, market players will tune in to speeches from Fed Governor Bies on Monday and Dallas Fed President Richard Fisher Tuesday. New York Fed President Timothy Geithner will speak on “Liquidity and Financial Markets” on Thursday.

Outside the retailers, earnings are expected from (among others) Brocade (BRCD) , American International Group (AIG) and the recently engaged satellite radio outfits XM (XMSR) and Sirius (SIRI) .

Finally, in Friday’s podcast I discussed how the past few days have brought about considerable hand wringing, a situation similar to what presaged Ben Bernanke’s Feb. 14 Congressional testimony and the subsequent rally. It’s entirely possible that a similar (bullish) setup is happening here, but I do believe there’s more weakness afoot as earnings season winds down and attention focuses on rising commodity prices and the Fed’s precarious predicament.

1 What would best describe your stance heading into the coming week of trading?

Bullish
Bearish
Neutral

2 Which of these sectors do you think is set to move up in the coming week?

3 Which of these sectors do you think is set to move down in the coming week?

Badgers worm their way into royal sett

FOR almost two centuries it has been celebrated as one of the most beautiful open spaces in Scotland. To preserve its glory, the Royal Botanic Garden Edinburgh must fend off daily threats from insects, arboreal diseases and rampaging children.

But it has never, in 184 glorious years, had to deal with an invasion of badgers. The shy, nocturnal mammals have somehow made their way to the gardens close to the city centre and dug at least two setts in its hallowed turf.

And, to the private dismay of garden staff, there is absolutely nothing they - or anyone - can do about it. “In some ways badgers are more protected than you or me,” one worker grumbled.

The badgers had numerous reasons to move into the garden: the sandy soil makes digging easy; the short grass is full of worms; there is plenty of undergrowth to protect their setts; and, best of all, the gates close to the public at night, meaning there are no human beings present to disturb them.

How they came to be there is, however, a puzzle. The gardens, and neighbouring Inverleith Park, are little more than a mile north of the city centre, and surrounded on all sides by development. Staff believe the badgers came to the Botanics as a result of a population explosion at a sett on the outskirts of the city, which forced younger animals to head off in search of a new home.

In recent years, badgers have increasingly moved into suburban areas, but nature watchers are surprised at the animals making their way so far into a densely populated city. Unlike urban foxes, badgers are not attracted to towns by the opportunity to forage in domestic bins, but the fact that the grass is usually cut short, which makes it easier for them to find worms, their favourite food.

Just after nightfall, especially on damp evenings, worms come to the surface in order to breed, only to find hungry badgers waiting to pounce on them. The badger will stick its snout into the soil, causing “snuffle holes” similar in size and appearance to a golf divot. Badgers also attack wasp nests and like eating wasp grubs.

But they can be a nuisance. Last week, residents in the Sheffield suburb of Gleadless complained that their lives were being made a misery by badgers screaming while mating and fighting.

Without the option of evicting the badgers, the Botanic Garden is preparing to capitalise on its unexpected visitors by offering badger-watching events to nature lovers keen to get a glimpse of the creatures as they emerge shortly after dusk. Managers hope the badgers will boost annual visitor numbers above 700,000.

Tony Garn, outdoor supervisor at the Botanic Garden, said the arrival of badgers was “a positive thing… although not without its challenges”.

He said: “When they are digging their setts they throw up a lot of earth which can gather around the roots of trees. That can deprive the roots of the oxygen they need to live and as a result the trees are at risk of dying.

“But we cannot clear the earth away from the trees, because that would be interfering with a badger’s sett and by law you cannot do that.”

Garn said he had no idea how many badgers were living in the garden. He added: “Not that we would want to do anything to them anyway or have them go away. We believe in biodiversity and it’s a good thing to have them. We have a world-class plant collection and we have a variety of animals. We want to use the fact that they are here to attract more visitors to the gardens, maybe people who wouldn’t normally come here. This is a good place for the badgers; short grass, so it’s easy to find worms, and best of all, the gates close at seven, so their main predator, man, is kept out.”

Tricia Alderson, the Edinburgh coordinator of the Edinburgh and Lothians Badger Group, said: “It is a surprise to find them in the Botanic Garden because they would have had to come quite a long way to get that far into the city. It is good news that they are there. They are fascinating animals.”

Alderson added: “We thought that the Botanic Garden would be too highly cultivated for them, but they seem to like it. They are simply reclaiming their ancient territory, they were once all over the country of course.”

The garden is a public body funded by the Scottish Executive and originally set up on a different site in the 17th century to grow medicinal plants. It originally occupied an area the size of a tennis court in the current grounds of Holyrood Palace. In 1999 it won the Grand Prize for the Finest Garden at the Kunming International Horticultural Exposition in China. Brock of ages

Badgers had been hunted and killed for centuries before the Protection of Badgers Act was introduced in 1991. The law bans the taking, injuring, selling, possessing or killing of badgers and it is an offence to ill-treat any badger, damage, destroy, disturb a badger sett or cause a dog to enter a badger sett. Badger baiting has been outlawed since 1835.

It is even an offence to be in possession of a dead badger, and anyone who finds one and wants to use its hide must register the death of the animal, including the Ordnance Survey co-ordinates of the place it was found, with the police.

The British badger population, estimated to be around 300,000, is concentrated in the south-west of England and is only thinly distributed in Scotland.

If you know there are badgers in the area and you want to feed them, try apples, pears, plums, plain peanuts or brazil nuts, but not salted or chocolate ones.

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Ford chief names an environmental executive

DEARBORN, Michigan: Not long ago, it would have been folly for an auto company chief executive to admit he believed in global warming, and just as unlikely for a carmaker to attach the word “sustainability” to a job title.

But Ford Motors chief executive, Alan Mulally, did both on Monday.

Speaking with journalists in a conference call, Mulally said, “I clearly believe the vast majority of data indicates that the temperature has increased. And I believe the correlation and analysis that its mainly because of greenhouse gases.”

His comments came as Mulally announced a promotion for a Ford vice president, Susan Cischke, to a new job as senior vice president for sustainability, environment and safety engineering.

Cischke, who now reports to Mulally instead of to Fords Washington office, will be in charge of creating a long-range strategy on sustainability matters.

The first executive at a Detroit auto company to have sustainability in her job title, she previously was vice president of environmental and safety engineering.

She becomes the highest-ranking woman at Ford and the latest executive to take on an expanded role since Mulally became chief executive in September.

The auto industry is facing the likelihood that it will be forced to make cars and trucks that achieve better gasoline mileage. On April 2 the Supreme Court ruled that the Environmental Protection Agency had the authority to regulate carbon dioxide and other greenhouse gases from automobiles. The primary way that can be done, carmakers and environmentalists say, is to increase automobile fuel economy.

As a result, Detroit carmakers, which have a long history of fighting regulations, are saying they want an active role in the movement to reduce the damage vehicles do to the environment.

They may have little choice: lawmakers have introduced measures in Congress to raise U.S. fuel economy standards to as high as 40 miles a gallon, from the current standard of 27.5 miles a gallon for cars and 24 miles a gallon for light trucks.

Likewise, the Bush administration is proposing a series of steps on the environment that include raising fuel economy by about one mile a gallon each year over the next few years.

“We can have it if we all work together,” Mulally said Monday.

Ford has previously tried to position itself as an environmentally conscious company, especially when Mulallys predecessor, William Clay Ford Jr., was in charge, only to pull back on promises of building more efficient vehicles.

For example, it abandoned a pledge, made in 2000, to improve the fuel economy of its sport utility vehicles by 25 percent by 2005. Last year Ford gave up on plans to sell 250,000 hybrid-electric vehicles each year by the end of the decade, saying instead that it would place greater emphasis on developing vehicles that can run on fuels other than gasoline, like E85, a mix of ethanol and gasoline.

Mulally acknowledged that Ford had made those vows before it had the technology to achieve them.

“On one hand, you have to give Ford credit for being a leader and for being out front originally,” he said. “On the other side, were just seeing another recommitment of Ford that this is really important and were going to make it a high priority of the company.”

Representatives of environmental groups said that they were glad to see Mulallys latest steps but had not forgotten Fords record.

“Its always good when we see a company making steps toward becoming more environmentally sustainable,” said Mike Hudema, director of the Freedom From Oil Campaign, an alliance of three environmental groups.

“But we do always have to put that in context with Fords history,” he said, “which unfortunately on the environmental front is not a very good one.”

Dan Becker, director of the global warming program at the Sierra Club, said Ford was good at making promises to help the environment but “when it comes to doing them they seem to forget or fall down on the job.”

He questioned whether Cischke was the right executive to focus on sustainability, saying that she had testified before Congress opposing steps the Sierra Club had proposed. “Its as if the Yankees promoted manager Joe Torre to reach out to the Red Sox,” he said.

Nick Bunkley contributed reporting.

UK Feb manufacturing PMI 55.4, highest since July 2004 - sources

LONDON (AFX) - UK manufacturing sector activity rose to its highest level in two and a half years in February, coming in well above analysts’ expectations, sources said of a key survey.

They said the Chartered Institute of Purchasing and Supply’s purchasing managers index jumped to 55.4 in February, its highest level since July 2004, from an upwardly revised 53.2 in January.

Analysts polled by AFX News had predicted a much more moderate rise to 53.0 from the original January estimate of 52.8.

A reading above 50 in the index indicates expansion.

jessica.mortimer@thomson.com

jkm/nes

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U.S. multinationals hire more abroad

WASHINGTON (AP) - U.S. multinational corporations hired workers overseas at a faster pace than in the United States in 2005, for the second year in a row, a Commerce Department report said Thursday.

U.S. multinationals — defined as U.S. companies, excluding banks, that own majority stakes in foreign affiliates — added 310,900 people to their overseas payrolls in 2005, an increase of 3.6 percent to 9.1 million.

Meanwhile, the same companies hired 238,000 workers in the United States, boosting their U.S. employment by 1.1 percent to 21.5 million.

The figures for 2005 continue a long-standing trend. U.S. multinationals increased their domestic employment by 0.6 percent in 2004, the report said, while boosting their overseas hiring by 6.1 percent that year. From 1988 to 2002, hiring by U.S. multinationals abroad rose by an average of 4 percent annually, while hiring by the same companies in the United States increased by 1.6 percent.

Seventy percent of the 30.5 million people employed by U.S. multinationals were in the United States in 2005, the department said, down from 78.8 percent in 1988.

In the area of capital spending, U.S. companies boosted their activity in the United States faster than overseas, the report found.

U.S. multinationals increased their spending on buildings, machinery and other equipment in the United States by 15.3 percent to $340.7 billion in 2005. Foreign investment by U.S. multinationals, meanwhile, increased 14.9 percent, to $137.3 billion, the department said.

The report, by the Commerce Department’s Bureau of Economic Analysis, said that shifts in employment and capital spending by U.S. multinationals do not necessarily result from shifts in production overseas. Other causes could include different rates of economic growth between the United States and other countries, the report said, or the creation of new market opportunities abroad that cannot be served by exports.

The report, which is based on preliminary data, found that foreign multinational companies employed 5.1 million people in the United States in 2005, or 4.5 percent of total U.S. employment in private industries. That figure represented a slight drop of 0.7 percent from 2004.

But foreign-owned firms continued to increase their capital spending in the U.S., investing $120.9 billion, up 7.1 percent from 2004.

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