Monday April 21, 2008 - 16:44:10 GMT
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CEP News - www.economicnews.ca
Midday News Recap: Chicago Fed Activity Report Signals U.S. Likely in Recession
12:21 04/21 (CEP News) â€“ On this light day of North American
economic data releases, the Chicago Fed National Activity index
signalled a recession has likely begun in the U.S. In Canada,
international securities transactions were released and oil continued
its surge to a new record high.
Canadian investors increased
their holdings of foreign securities by $6.1 billion in February over
the previous month, Statistics Canada reported Monday. Canadian
investors bought $2.6 billion of foreign bonds in February, with $2.4
billion of the total in U.S. government bonds, and added $3.8 billion
in foreign stocks, $2.9 billion of which were in U.S. shares.
The February results marked a sharp turnaround from the prior month,
when Canadians dumped more than $2.3 billion in foreign stocks and rang
up total net investment in foreign securities of only $232 million
The only significant U.S. data released today was the Chicago Fed
National Activity Index for March, which moved up to -0.78 and
signalled that a recession is likely underway in the U.S. The February
reading was revised to -1.28 in February from a previously reported
-1.04. Despite the improvement, the three-month average indicates that
a recession has likely begun, the Chicago Fed Bank report said on
The three-month moving average increased to -0.86 in March from the
previous month's -0.92, marking the fourth consecutive month the
three-month average has been near or below the -0.70 threshold. A value
below -0.70 following a period of expansion indicates an increasing
likelihood that a recession has begun, the report added.
Millan Mulraine, economics strategist from TD Securities, said,
"Overall, although there was a slight improvement, the report adds to
the slew of other economic indicators suggesting that the U.S. economy
may have slipped into a recession in the first quarter of this year."
Royal Dutch Shell said it will temporarily stop exports from a port in
Nigeria following a pipeline attack last week. The UK company announced
it will interrupt exports beginning April 22 after announcing force
majeure. The move affects 169k barrels a day of crude exports for the
remainder of April and May.
The Federal Reserve Bank announced a Term Auction Facility for Monday.
It will offer $50 billion in 28-day credit with a minimum bid rate of
2.05%. The minimum bid amount will be $5 million with a $5 billion
maximum bid per institution. Submissions will be accepted between 11:00
a.m. EDT and 1:00 p.m. EDT.
Speaking at a news conference in Paris, Bank of France Governor
Christian Noyer said that lower interest rates in the U.S. could
adversely affect the French central bankâ€™s revenue for 2008 as the U.S.
dollar remains a main element in the central bankâ€™s forex reserves.
Earlier in the day, the Bank of France reported â‚¬2,317 billion in net
profits in 2007, the highest in 35 years, due to increases in
investment returns and spending controls.
Speaking at the Austrian National Bank in Vienna on Monday, European
Central Bank Governing Council member Klaus Liebscher said that while
risks to growth are predominant and are greater due to the financial
market developments, there was no room for interest rate cuts.
Liebscher, also the governor of the Austrian National Bank, said
current inflation figures were concerning and urged reasonable price
setting and wage negotiations.
The first major earnings report of the week was a set of disappointing
figures from the Bank of America. Analysts surveyed by Bloomberg
expected first-quarter profits of 41 cents per share but the banking
giant earned only 25 cents. The company announced writedowns of $6.01
billion and CEO Kenneth Lewis said second-quarter U.S. GDP growth will
be "minimal at best."
In overnight news, the Bank of England said a plan to allow UK banks to
swap mortgage-backed assets for government bonds is in the pipeline.
The central bank said the preliminary size of the plan is likely to be
around Â£50 billion, with an asset swap permitted for a period of one
year, which may be renewed for a total of three years.
Year-over-year UK house prices increased by only 1.3% in April
following a 5.0% gain in March, as gauged by Rightmove. The property
website noted that the drop indicated sellers were recognizing that a
decade of rising UK house prices had come to an end.
In Australia, inflation pressures reemerged following a strong report
on producer prices. The first-quarter producer price index gained 1.9%
against expectations of a 1.0% increase.
By Stephen Huebl, [email protected], with contributions from Adam
Button, [email protected], Ryan Szporer,
[email protected], Todd Wailoo, [email protected], Patrick
McGee, [email protected] and Geoff Matthews,
[email protected], edited by Nancy Girgis,
(END) Â©CEP Newswires - Â©CEP News Ltd. 2008. All Rights Reserved. www.economicnews.ca
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