Orders for U.S. durable goods unexpectedly dropped in June and inventories climbed at the slowest pace in a year, evidence that companies lost confidence in the strength of the recovery as the second quarter ended.
Bookings for goods meant to last at least three years fell 2.1 percent after a 1.9 percent gain the prior month that was smaller than last reported, the Commerce Department said today in Washington. The median forecast of 76 economists surveyed by Bloomberg News projected a 0.3 percent increase. Orders excluding transportation equipment rose less forecast and demand for business equipment dropped.
Bloomberg
Australia’s consumer prices rose more than forecast in the second quarter as high cost of food and fuel put pressure on inflation.
Prices rose by 3.6% in the three months to the end of June from the same period last year, latest data showed.
Food prices have been rising due to the devastation caused by floods and cyclones earlier this year.
The Australian dollar hit a record high against the US dollar on concerns that central bank will raise interest rates.
BBC News
The euro gained 0.1 percent to $1.4238 this morning in New York to reach a five-month high against the dollar. Speculation that the European Central Bank will soon raise interest rates to deal with rising inflation has investors turning to the euro despite the ongoing debt crisis in Europe.
“It’s a risk-on and monetary tightening story,” said Jeremy Stretch, executive director of foreign-exchange strategy at Canadian Imperial Bank of Commerce in London. “Euro-dollar is a beneficiary of that, and looks like it’s going to continue to trade higher.”
Source: Bloomberg
Sales of new homes in the US fell by 12.4 percent to an annualized rate of 276,000 units. This is the lowest rate since data was first collected in 1963 according to the Commerce Department and is seen by many as confirmation that the economy is slowing more rapidly than previously thought. Analysts are warning that this could suggest the third quarter could actually see a decline in growth.
“If you don’t get a pick up in the next couple of months, it sure looks like it’s possible the economy could contract in the third quarter,” said Keith Hembre, chief economist at First American Funds in Minneapolis, Minnesota.
Source: Reuters
The US Commerce Department said that consumer spending rose by 0.2 percent in May. Despite the slight increase, spending on goods actually decreased in May, while spending on services increased, which the Commerce Department attributed to a greater demand for electricity.
Source: Associated Press
The US Commerce Department said today that the economy grew by 3.2 percent during the first quarter. The growth was due mostly to a 3.6 percent increase in consumer spending – the largest jump in spending in three years.
The outlook for the rest of the year continues to be for “moderate” growth. For this reason, expectations remain muted for a significant improvement in unemployment which will likely remain in the 9 percent range for the remainder of the year.
Source: Associated Press
As has been mentioned many times already, a true US recovery is not possible until the housing sector improves. On that front, some good news was released this morning, as the Commerce Department announced that housing starts rose to a 16-month high based on an increase of 1.6 percent following the strong growth of 5.7 percent in February.
Of note however, is that most of the increase can be attributed to the building of multi-family homes a single-family dwellings actually fell by 0.9 percent.
Source: Associated Press
Yesterday’s weak bond sale and the increasing costs for Greece to borrow money, has prompted the beleaguered nation to formally request meetings with the European Commission and the International Monetary Fund. Yesterday, Greece’s Prime Minister, George Papandreou, addressed the Greek Parliament describing the availability of a rescue package as a “success” for Greece.
“It is a success for Greece that such a mechanism has been set up,” Papandreou told MPs. “Today, there is a mechanism where before there was nothing. It is a safe harbour for the country from the speculation in markets and a concrete manifestation of support by the European Union.”
Source: London Times
The JPY and the USD were the clear winners in the O/N session as the speculation that Greece will be forced to activate its rescue package has triggered risk aversion in the market. The Greek Prime MInister asked for a meeting with EU and IMF officials starting April 19th. While this meeting is taking place a group of German Professors prepare their plan to sue the EU if they Greek bailout is paid. Their argument is that this aid package violates the no-bailout clause of the EU treaty. It is worth mentioning that this same group of professors sued the German government in 1998 over the country’s entry into the Euro.
Morgan Stanley has outlined that if this trend of fiscal irresponsibility forces more countries into asking for EU aid Germany may opt out of the eurozone. The Bundesbank Germany’s Central Bank has always been known for its inflation adversity and the reason for its concern over bailing out member countries as this would reduce the value of public debt and create a higher inflation.
The US$ is stronger in the O/N trading session. Currently it is higher against 10 of the 16 most actively traded currencies in a ‘whippy’ trading range. The USD$ is higher against the EUR -0.33%, CHF -0.25%, GBP -0.53%. The commodity currencies are a mixed this morning, CAD +0.11% and AUD -0.24%. The market should expect the AUD to remain better bid on any pull backs (0.9321).
Crude is lower in the O/N session ($84.56 down -95c). US Dollar strength has put downward pressure on oil, even after the EIA report pointed to a decrease of 2.2 million barrels in this week’s inventories. The combination of US Dollar strength and US Economic weakness paint a negative picture for crude demand. Technical analysts have their eye on $90 by year end.
Commodities prices could fall if the USD continues to find a foothold. Gold would lose its alternative investment status if the dollar continues its rebound USD$ ($1,156). Platinum and palladium have outperformed Gold as jewelry demand and Chinese auto industry demand have picked up. Yuan revaluation is also expected to boost gold as its price would become more attractive to Chinese buyers of the metal.
The Nikkei closed at 11,102 down -171. The DAX index in Europe was at 6,285 down -5; the FTSE (UK) currently is 5,815 down -9 The early call for the open of key US indices is lower.
Note: Dean will be away traveling for the next two week’s and will return to publication on April 29th.
The trade deficit in the U.S. widened in February more than anticipated as imports climbed, adding to evidence of a rebound in economic growth.
The gap increased 7.4 percent to 39.7 billion from a revised $37 billion the prior month, the Commerce Department said today in Washington. Imports climbed 1.7 percent as Americans bought more computers and televisions made abroad, while exports rose to the highest level since October 2008.
Bloomberg
