Stocks Recover from Low as Dollar Pares Gains

* The dollar pared earlier gains in late-Tuesday New York trading. The dollar Libor-OIS spread, a measure of banks’ reluctance to lend, quadrupled since early-May and widened to the highest level since July. Global economic data were generally strong. US consumer confidence climbed to the highest level in two years; UK Q1 2010 GDP growth was revised upward to 0.3% q/q; and eurozone industrial new orders posted the largest month-on-month gain since June 2007. The S&P 500, reversing earlier steep losses, was up a modest 0.38 to 1,074.03. The yen gained modestly. The euro and pound pared earlier losses. The International Monetary Fund said Spain has been too slow to strengthen its banking system. The Australian dollar touched the lowest level since July. The Canadian dollar traded at the lowest level since November before paring its losses.

* The dollar index pared gains after failing to break the resistance of last week’s high in the 87.50 area. The index has risen since early-December and may need further consolidation before moving higher. There is support at the 85-handle. The dollar index is highly correlated with the S&P 500 (see our May 21 report). The S&P 500 index successfully tested the 1040 area today. A consolidation in the dollar index should support the oversold stock market for a while. However, this may be temporary as the dollar’s gain will likely continue and that will deflate asset prices.

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Financial and Economic News and Comments

US & Canada

* The S&P/Case-Shiller 20-city composite home price index was unchanged m/m sa in March after a 0.1% m/m decline in February, according to S&P/Case-Shiller housing data. The 20-city composite HPI was down 0.5% m/m nsa, a sixth straight monthly decline, following February’s 0.9% m/m decrease. 20-city home prices posted a second consecutive year-on-year gain in March, rising 2.3% y/y, following an upwardly revised 0.7% y/y February advance. Nationally, home prices fell 3.2% q/q nsa in Q1 2010 after a 1.0% q/q decline in Q4 2009; however, they increased 2.0% y/y in Q1.

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* The Conference Board consumer confidence index increased to a higher-than-expected 63.3 in May from a downwardly revised 57.7 in April, indicating US consumer sentiment rose for a third consecutive month to the highest level in two years amid better job-market prospects, a Conference Board report showed, compared with May 2009’s 54.8 level. The present situation index improved to 30.2 in May, the highest level since December 2008, from a downwardly revised 28.2 the previous month. The expectations index climbed to 85.3, the highest reading since August 2007, from April’s 77.4.

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* FHFA US house prices increased 0.3% m/m sa in March, the first gain in four months, after a revised 0.4% m/m decline in February, according to the Federal Housing Finance Agency’s monthly house price index. March house prices decreased 2.2% y/y, a fourth consecutive year-on-year slide. House prices fell 1.9% q/q sa in Q1 2010, an 11th straight quarterly fall, after a revised 0.5% q/q decline in Q4 2009. Q1 house prices slid 3.1% y/y, following a 1.5% y/y Q4 decline.

* The Richmond Fed manufacturing index declined as forecast to 26 in May from 30 in April, indicating manufacturing activity in the central Atlantic region expanded for a fourth successive month but at a slower pace, the latest survey released by the Federal Reserve Bank of Richmond showed. The new orders index decreased to 36 in May from 41 the prior month, suggesting new orders grew for a fifth straight month but at a slower rate. The shipments index increased to 32 from April’s 30. The employment index fell to 4 in May from 13 in April, suggesting employment expanded for a second month but at a much slower pace.

Europe

* Eurozone industrial new orders grew a more-than-expected 5.2% m/m sa in March, the fourth gain in five months and the largest since June 2007, after an upwardly revised 1.9% m/m advance in February, according to data from Eurostat. March industrial new orders rose 19.8% y/y nsa, a fourth consecutive year-on-year rise and the most in almost 10 years, following an upwardly revised 12.5% y/y February gain.

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* UK GDP grew as forecast 0.3% q/q in Q1 2010 (vs. initially reported +0.2% q/q) after a 0.4% q/q gain in Q4 2009, GDP data from the Office for National Statistics (ONS) showed. Manufacturing output increased 1.2% q/q, the most since Q1 2006, following Q4’s 0.8% q/q advance. Gross fixed capital formation rose 1.5% q/q in Q1, rebounding from a 2.7% q/q decrease the prior quarter. The Q1 GDP declined as expected 0.2% y/y (vs. initially reported -0.3% y/y), following Q4’s 3.1% y/y contraction.

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* UK service-sector output increased as forecast 0.2% in the three months to March, a fifth straight gain, after a 0.4% increase in the three months to February, according to data from the ONS. March service-sector output grew 0.8% y/y, a second consecutive year-on-year gain and the largest since July 2008.

Asia-Pacific

* New Zealand’s 1-year-ahead consumer-price inflation expectations accelerated to 2.9% in the Q2 2010 survey from 2.1% the prior quarter, and the 2-year-ahead expectations rose to 2.80% from 2.65%, according to the June 2010 Reserve Bank of New Zealand survey of expectations.

Источник: Hans Nilsson

25.05.2010