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The Conference Board Leading Economic Index (LEI) for the U.S.A. rose in March by 0.8% to trip over the critical 100 level barrier

Apr 22 • Morning Roll Call • 5849 Views • No Comments

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shutterstock_176701997In a quiet trading day, due to the extended Easter holiday period, the main indices in the USA closed up on the day in relatively thin trading conditions. The high impact news published in the afternoon session mainly included major mortgage lenders in the USA revamping their forecasts for the housing market. Both federally controlled major lenders cut their forecasts on sales and on new home building units for the coming year, not by any dramatic amount but potentially enough to signal that they’re calling the top of the market.

The Conference Board Leading Economic Index (LEI) for the U.S.A. rose in March by 0.8% to trip over the critical 100 level barrier. This followed a 0.5 percent increase in February, and a 0.2 percent increase in January.

Worrying news from Japan came in the form of the latest export figures, which fell to their weakest level in over a year. The timing couldn’t be worse for a domestic economy that’s just suffered a sales tax rise from 5-8 percent.

Fannie, Freddie cut housing-market forecasts for 2014

Federally controlled mortgage-finance giants Fannie Mae and Freddie Mac have cut their forecasts for the U.S. housing market’s performance in 2014. Doug Duncan, Fannie’s FNMA chief economist, said Monday that he now expects builders to start construction on 1.05 million housing units this year, down 50,000 from Fannie’s forecast earlier this year. He cited constraints on credit and labor. “We have downgraded our housing forecast slightly due to a lackluster sales picture, but the recent loss of momentum is likely a temporary one,” Duncan said. Last week, Freddie cut its forecast for home sales.

The Conference Board Leading Economic Index (LEI) for the U.S. Increased in March

The Conference Board Leading Economic Index® (LEI) for the U.S. increased 0.8 percent in March to 100.9 (2004 = 100), following a 0.5 percent increase in February, and a 0.2 percent increase in January. “The LEI rose sharply again, the third consecutive monthly increase,” said Ataman Ozyildirim Economist at The Conference Board.

After a winter pause, the leading indicators are gaining momentum and economic growth is gaining traction. While the improvements were broad-based, labor market indicators and the interest rate spread largely drove the March increase, offsetting the negative contribution from building permits.

Japan exports growth slows sharply, keeps pressure on BOJ to act

Japan suffered its worst annual trade deficit in March as exports growth slowed to its weakest in a year, suggesting a rapid loss of economic momentum that may prompt policy makers into early action as a national sales tax hike puts more strain on growth. The Bank of Japan has repeatedly ruled out fresh easing measures in the near term, insisting that the economy is on track to meet its 2 percent inflation target even as recent soft data hit investor confidence. However, the double-whammy of weak external demand and a chill in domestic consumption from the April 1 sales tax hike to 8 percent from 5 percent might add pressures on the economy.

Market overview at 10:00 PM UK time

The DJIA closed up 0.25%, the SPX up 0.37% and the NASDAQ up 0.64%. NYMEX WTI oil was up 0.02% on the day at $104.32 per barrel whilst NYMEX nat gas was down 0.82% on the day at $4.70 per therm. The DJIA equity index future is up 0.13%, the SPX future is up 0.37% with the NASDAQ future up 0.84%.

Forex focus

The Bloomberg U.S. Dollar Index rose 0.04 percent to 1,011.32 mid afternoon in New York. Its last seven-day streak of gains ended May 17th.

The yen fell 0.2 percent to 102.62 per dollar after sliding 0.8 percent last week, the biggest decline since the five days to March 21st. Japan’s currency was little changed at 141.55 per euro. The dollar rose 0.1 percent to $1.3794 per euro, following a 0.5 percent weekly gain.

The dollar gained for a seventh day against a basket of peers, the longest streak in almost a year, as revised data in a Federal Reserve Bank of Chicago index signaled greater-than-forecast strength in the U.S. economy.

The New Zealand dollar declined 0.3 percent to 85.59 U.S. cents, after a 1.2 percent drop last week that was the biggest since the five days to Jan. 31.

The Aussie was little changed at 93.36 U.S. cents from last week, when it posted a 0.7 percent five-day drop. The Australian dollar was steady following its first weekly decline in five weeks, as China’s iron ore port inventory rose to 108.05 million metric tons in the week ended April 11th.

Bonds briefing

Benchmark 10-year yields fell one basis point, or 0.01 percentage point, to 2.71 percent late afternoon in New York. The price of the 2.75 percent note due in February 2024 gained 2/32, or 63 cents per $1,000 face amount, to 100 10/32. The yield reached 2.73 percent, the most since April 7th. Treasuries rose, pushing yields down from almost the highest levels in two weeks, as fatal clashes in Ukraine’s east spurred demand for the safety of government debt.

Fundamental policy decisions and high impact news events for April 22nd

Tuesday sees wholesale sales in Canada published, with the anticipation that the figure comes in at a circa 0.7% rise month on month. HPI for the USA is predicted to come in at 0.6% up for the month. Consumer confidence in Europe is anticipated to come in at -9, with existing home sales in the USA expected to come in at an annual rate of 4.57 million. The Richmond manufacturing index is anticipated to have recovered from -9 to a zero reading.

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