RationalFX: USA sees drop in number of new homes being built [17/12/2010]

Still problems weighing on the Euro Zone, its costing Spain 20% more this month to issue bonds over the previous, this still did not entice investors to cover the whole bond issue and made Moody’s say that Spain’s credit rating may be cut next year due to heavy debt servicing costs. We expect the euro zone to issue around a trillion Euro’s worth of debt next year. This crisis may hamper the UK’s road to recovery

Yesterday’s Movers

• This morning we saw Purchasing Managers’ Index for France, Germany and Euro Zone. The results were a mixed bag showing that in France those managers’ of manufacturing companies are slightly less confident about business conditions, however both Germany saw a slight increase and the wider Euro Zone saw an uptick in confidence.  If you take Spain and France’s PMI from the Euro PMI, it shows that the growth of activity in euro region is actually stagnating.
• The Services PMI released showed that Germany, France and the Euro Area are seeing falling services PMI figures, mostly stemming from the lack of business confidence and the snail pace of job creation, which will probably stay in place until employers see a rise in prices and profits so businesses start hiring again. The last piece of employment data showed that unemployment in the Euro Zone is nearing 11%.
• Thursday was the start of the EU summit, and no doubt comments leaking out will provide volatility for the Euro and its counterparts, especially as there are deep divisions between member states as to the best method to get out of debt, and no doubt increased pressure for the likes of Portugal and Spain.
• Euro Zone CPI came in as expected at 1.9% and excluding volatiles was 1.1%. This will provide stimulus to the next ECB meeting as to what quarter of 2011 they will be looking to increase interest rates if the inflation measure continues on an upward spiral.
• UK had a relatively quiet day with Retail Sales coming in less than the previous month and lower than expectations, this was due to people spending on things like toys, sports goods, watches and jewellery but, holding back on household goods. Also Consumer Inflation Expectations, whilst not the actual figure it’s a survey of people on where they feel prices will be in the next 12 months, and this increased by half a percent, the highest in 2 years.
• For the USA we saw the number of Building Permits fall month on month, and a drop in the number of new homes being built, these two figures go hand in hand, as you need a permit before you can start building a new home, and are a good indicator of the economic recovery as the figures relate to the construction sector, and indicates whether there will be an increase in construction jobs in the coming months and feeds into employment data like Non Farm Payrolls. However, the weekly jobless claims fell by 1,000 which shows that seasonal employment has ticked up.
• Also, we saw that Americans imported more than they exported last month, to the tune of $1 billion. The deficit has been increasing, coming above expectations and goes to show that the weaker dollar is still not enticing foreigners to import US produce.
• The Philly Fed index showed that manufacturers are optimistic over the next 12 months and went hand in hand with the increase of the New York Fed Index which showed a rise earlier in the week.

Today’s Market Movers

• Overnight we saw UK Nationwide Consumer Confidence, which came in at 45, lower than expectations and worse than last month’s figure.
• The EU summit is continuing, so expect to see some volatility in the majors
• The big figure this Friday is the German IFO Business Climate index, which is expected to show a slight decrease as analysts expect respondents to be slightly less confident of business conditions over the next 6 months
• We also have the Euro Zone Trade Balance, showing imports over exports.