Improvement in diversified sectors of market is full on in major economies

Wednesday, May 5, 2010

This afternoon, the ADP Non-Farm Employment Change will be released. Economists predict that the ADP will show that companies hired 29,000 workers last month, a substantial improvement over a 23,000 decline in March. This ADP figure is widely considered a predictive index for Friday’s high anticipated Non-Farm payrolls. Later in the US, The Institute for Supply Management Non-Manufacturing PMI measuring the Level of a diffusion index based on surveyed purchasing managers, excluding the manufacturing industry is expected to rise from 55.4 points to 56.2- another positive indicator for the U.S. market.

Yesterday, the U.S Dollar received a boost as reports showed an unexpected increase in both the housing and manufacturing sectors. A report, showing that more Americans signed contracts in March to buy previously owned homes before the expiration of a tax credit, has helped support the housing market. According the National Association of Realtors pending home sales increased an unexpected 5.3%, after rising 8.3% in February. The housing market, which triggered the worst recession since the Great Depression, has received a boost from a tax incentive of as much as $8,000 for buyers who signed the contracts by the end of April. Job gains are needed to help sustain demand and limit foreclosures in the absence of government aid, broadening the economic recovery.

Meanwhile orders placed with U.S. factories unexpectedly rose in March, propelled by demand for business equipment and petroleum, signaling the economic expansion gained speed at the end of the first quarter. The 1.3% increase in bookings matched the prior month’s gain, which was more than twice as large as previously estimated, the Commerce Department yesterday. Sales rose 2.2%, the most since November 2007.

In The U.K. the pound strengthened against its most-active counterparts as polls show David Cameron’s Conservative Party may come closest to winning tomorrow’s election. Yesterday in the forex online market the GBP/USD hit $1.51047, its lowest level since March 31st. The pair lost 0.79% yesterday to close at 1.52472, but has managed to rebound in this morning’s trading session to touch on a high of 1.51640.

The U.K.'s manufacturing sector expanded at the fastest pace in 15-and-a-half years in April, boosted by a record high level of new export orders due to continuing sterling weakness, data showed yesterday. Markit and the Chartered Institute of Purchasing and Supply reported that the PMI for the manufacturing rose to 58.0 from March's revised 57.3. Later today, the Markit will release the construction PMI. Last month, the construction sector posted unexpected figure of 53.1 - a jump above the all-important 50 point mark. Analysts expected that this construction figure to stay constant, increasing slightly to 53.5.

In Australia, home-building approvals rose in March at the fastest pace since 2002, a sign that housing demand hasn’t been damped by the central bank’s world- leading round of interest-rate increases. According the Bureau of Statistics the number of permits granted to build or renovate houses and apartments rose 15.3 %from February, when it previously dropped a revised 2.7%.
Yesterday, the RBA opted to increase the benchmark lending rate for the sixth time in seven meetings, pushing borrowing costs to what Governor Glenn Stevens referred to as “average” levels. The moves are partly aimed at preventing a property bubble after housing prices surged 20% in the 12 months through March. According to economists, this report is encouraging as it is a leading indicator for employment, particularly for workers in the construction industry.
After plunging 1.88% against the greenback yesterday, to close at 0.90930USD, the Aussie rose slightly this morning, toughing on a high of 0.91167USD.

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