Safe-haven moves dictated movements in the foreign exchange market, with the dollar strengthening against most of its counterparts and pushing the euro back toward the 1.40-figure. The US equity market slumped on economic reports released earlier in the session, with the Dow Jones and S&P 500 losing over 1%.
The data this morning included the April Case-Shiller home price index, the NY NAPM index, the June Chicago PMI and the June consumer confidence index. The April Case-Shiller home price index declined by less than anticipated, falling by 0.6% versus a 2.2% drop in the previous month and lower by 18.1% on the year, improving from an 18.8% decline a year prior. The Chicago PMI report for June was inline with consensus estimates at 39.0, albeit up from the May reading at 34.9. The employment component of the PMI increased to 28.9 versus 25.0 while new orders rose to 41.6 from 37.3 previously. The key element in today's data that drove the markets lower was a disappointing report in the Conference Board's June consumer confidence survey, which missed expectations for a marginal improvement to 55 from 54.9 in May, instead falling beneath the 50-level to 49.3 from a downwardly revised reading of 54.8 a month prior.
The economic calendar for the remainder of the holiday-shortened week includes the June ADP private sector payrolls report, May pending home sales, May manufacturing ISM, durable goods orders and on Thursday, the key June non-farm payrolls report, and the June unemployment rate. Tomorrow's ADP private sector payrolls report will be closely scrutinized as a proxy for Thursday's non-farm payrolls, with ADP estimated to improve to -411k versus the previous month at -532k. Meanwhile, the government report on Thursday will likely reveal a larger amount of jobs loss in June at -368k from 345k in May and the unemployment rate is expected to creep up further to a new multi-decade high at 9.4% from 9.2%.
The key highlight from the Eurozone this week will be the ECB monetary policy decision on Thursday morning. While no change is expected from the Bank, holding interest rates steady at 1.0% -- markets will closely scrutinize the subsequent policy statement from ECB President Trichet. It will be interesting to see how Trichet will address recent data, which revealed inflation rates falling into negative territory for the first time in 12-years. With the figures well below the ECB's inflation mandate to keep target consumer prices just below 2%, Trichet will again have to address fears of deflation, which he has previously downplayed.