Economy - Wednesday

Fed sees subprime 'contained'

Dallas Fed chief Richard Fisher, sticking to the central bank's script, said the damage from the subprime lending crisis has been "largely contained" but could delay a recovery in home construction and curb economic growth. "Fortunately, the financial system and the economy are strong enough to weather this storm," he said. Fisher is not a voting member of the Fed's policy-setting committee this year.

The Mortgage Bankers Association's index of mortgage applications fell 3.2% to 649.5 in the week ended Mar. 30 as borrowing costs rose. It was the third straight weekly drop. But the timely gauge of housing demand hasn't fallen much recently despite fears that subprime lenders' woes and rising foreclosures would shut out many would-be borrowers. Europe's service sector steady

The RBS/NTC Eurozone services business activity index fell to 57.4 in Mar. from 57.5 in Feb. but that's still near Jan.'s 6-month high. Germany and France rose while Italy fell. The prices charged index rose to 53.8 in March from 53.2, bolstering expectations that the European Central Bank will raise interest rates a quarter percentage point 15 4% in June.

Retail sales in the 13 countries using the euro rose 0.3% in Feb. from Jan., the EU statistics office said. Consumer spending is slowly rising amid falling employment and buoyant economic growth. The Chartered Institute for Purchasing and Supply/Royal Bank of Scotland's service sector index rose to 57.6 in March from 57.4 in Feb. Prices also rose, indicating higher inflation in the U.K. German manufacturing orders jumped 3.9% in Feb. That's the biggest gain in more than 2 years, thanks to strong overseas orders for machinery and cars, the gov't said. COMING UP THURSDAY

Initial jobless claims for the week of March 31, 8:30 a.m. EDT (forecast: 320,000) FRIDAY

Jobs report for March, 8:30 a.m. EDT (forecast, nonfarm payrolls: 135,000; unemployment rate: 4.6%; hourly earnings: 0.3%)

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