An indicator of business activity in fell to its lowest point since July 2009, with double-digit declines in production, new orders, and inventory backlogs.
The Institute for Supply Management’s Chicago Business Barometer fell 13.6 points in February, indicating a contraction of business activity in the region for the first time since 2013.
The US dollar is firmer to start the week against most of the major currencies. The Eurozone reported less deflation than expected, and Germany and Italy reported better manufacturing PMIs. This helped the euro recover from the initial slide in Asia that had taken it down to $1.1160. Disappointing capex figures from Japan coupled with US 10-year yields firming back above 2.0%, helped lift the dollar toward JPY120, but offers there capped a stronger advance.
March is said to come in like a lion and leave like a lamb. It does indeed appear to be coming in like a lion for investors. There are four major central bank meetings and the US employment report. Although Yellen did not convince many that the Fed is set to hike rates in June, yields in the Eurozone continue to fall in anticipation of the bond-buying scheme that will start later this month. The resulting widening of the interest rate differentials lent the dollar support.
New home sales fell slightly in January, which economists are blaming on cold weather in the Northeast.
Approximately 481,000 new single-family home sales occurred in January on a seasonally adjusted annualized rate, according to a new report released by the Commerce Department. While the department revised upwards its previous estimate for December sales, a slowdown in January came despite falling interest rates and relative warmth in some parts of the country.
A decline in existing home sales and a slowdown in manufacturing suggest the U.S. economic recovery may be stalling.
The National Association of Realtors announced Monday that total existing home sales fell 4.9% to a seasonally adjusted annual rate of 4.82 million units in January, the lowest level since April 2014. While mortgage rates have fallen significantly from April, buyers are not coming to the market as much as many analysts had expected.
The US dollar caught a strong bid to start the week. The prospects that Yellen will keep the June rate hike in play after the FOMC minutes are diminishing it may be lending the dollar support, though US rates are only slightly firmer.
President Obama is asking congress to raise the minimum wage (MW) to $10.10 an hour, from $7.25. The appeal has taken place only months after Gov. Jerry Brown of California signed a bill to raise the MW in California to $10 an hour in 2016.
Although it is easy to think of a MW increase as a benefit on the surface, it is not that simple. The increase, alongside at least two state proposals, will only harm small businesses, and reduce the amount of full or part-time jobs.
Less Americans are buying houses and applying for mortgages in a trend that is hurting the new housing and construction industries.
In three separate reports from different agencies and private firms released Wednesday, the United States real estate sector showed marked weakness while manufacturing productivity was significantly weaker than expected.
The capital markets are particularly difficult to navigate at the moment. The news stream is noisy. There are three confusing issues: the Fed, Greece and Australia.
What should one think about the FOMC minutes? The market clearly saw the minutes as dovish and reducing the chances of a June lift-off. The debt market rallied, with the December 2015, Fed funds implied rate slipping below 50 bp, and the dollar came off. However, we think that 1) the market is exaggerating the dovishness and 2) take on board events since last month’s meeting.
Strong employment and earnings data in the UK lifted sterling to the upper end of its recent range near $1.5450. A break would quickly target the $1.5500-$1.5600 area. The claimant count fell by 38.6k, which is about 50% more than the consensus expected, and the December decline revised up to 35.8k from 29.7k. The unemployment rate fell to a new cyclical low of 5.7% (ILO measure).
