* The dollar rose on safe haven flows in NY trading Thursday as risk aversion increased on concern the recession is deepening. US continuing jobless claims rose to a record high, new orders for durable goods fell more than expected and new-home sales plunged to the lowest level since at least 1963.The yen rose against other major currencies as US stocks fell. Despite the plunging stock market, Treasury notes fell on rising supply pressure, pushing the 10-year note’s yield to its highest level since early-December. The euro declined on more bearish eurozone economic data and George Soros’ comment that the euro may not survive the global financial crisis. German unemployment rose more than expected and eurozone consumer sentiment dropped to a record low in January. The Canadian and Australian dollars fell on the increased risk aversion and sliding commodity prices.
* The GBP/USD rose for a fourth straight day after falling to decades lows on concerns about the solvency of the UK banking system and the recessionary UK economy. After finding support in the 1.35-area, the GBP/USD is testing resistance in the 1.45-area. The pair is in a downtrend, the resistance will likely hold and a new test of the 1.35 is possible.
Financial and Economic News and Comments
US & Canada
* US durable-goods orders posted the fifth consecutive monthly drop in December, declining a more-than-expected 2.6% m/m to a seasonally adjusted $176.80 billion, following November’s downwardly revised 3.7% m/m decrease, Commerce Department data showed. Excluding transportation, durable-goods orders fell a more-than-expected 3.6% m/m after November's downwardly revised 1.7% m/m decline. Durable-goods orders dropped 19.7% y/y and dropped 15.0% y/y excluding transportation. A key barometer of business equipment spending -- orders for non-defense capital goods excluding aircraft -- declined 2.8% m/m in December after a 1.7% m/m increase in November. Shipments for non-defense capital goods excluding aircraft increased 0.9% m/m in December, following November’s downwardly revised 1.4% m/m decline.
*US initial jobless claims unexpectedly rose 3,000 to a seasonally adjusted 588,000 in the week ending January 24, following the prior week’s downwardly revised 585,000, Labor Department data showed. The 588,000 level was just 1,000 below the highest reading since the 1982 recession, which was reached in December. The 4-week average of new claims jumped 24,250 to 542,500. Continuing jobless claims in the week ending January 17 soared 159,000 to 4.776 million, the highest since records began in 1967, following the preceding week’s upwardly revised 4.617 million. The insured unemployment rate was 3.6% for the week ending January 17, after the prior week’s 3.4%.
*US new-home sales in December plummeted to the lowest level on record since at least 1963, falling a much more-than-expected 14.7% m/m to a seasonally adjusted annual rate of 331,000, following November’s downwardly revised 4.4% m/m decline to an annual rate of 388,000, Commerce Department data showed. December new-home sales plunged 44.8% y/y. The median price of new homes fell 9.3% y/y to $206,500 in December. The average price dropped 13.2% y/y to $246,900. As for inventories, there were estimated 357,000 homes for sale in December, representing a 12.9 months’ supply at the current sales pace, compared with November’s estimated 397,000 homes for sale, a 12.5 months’ supply. Regionally, December new-home sales fell 28.2% m/m in the Northeast, 20.2% m/m in the West, 12.1% m/m in the South, and 5.6% m/m in the Midwest.
* Canada’s raw materials prices dropped a more-than-expected 15.4% m/m in December after falling 13.4% m/m in November, Statistics Canada reported.
* Canada’s business confidence dropped to its lowest level since Q3 2001 and a contraction in business investment is likely to follow, the Conference Board of Canada said. A survey of firms conducted in the first three weeks of January showed a grim outlook on profitability with only 15.5% of firms expecting a better profit and 42.9% expecting to be less profitable. The business confidence index currently stands at 68.9, having dropped nearly 38 points since Q2 2007.
* European confidence in the economic outlook in January dropped to the lowest level since 1985, with the economic sentiment indicator falling to 68.9 from December’s upwardly revised 70.4, the European Commission said. The eurozone business climate indicator fell less than expected to -3.16 in January from December's upwardly revised -3.09. The consumer confidence indicator slipped to -31 from -30, while the industrial confidence indicator declined to -34 from -33, both in line with forecasts. The services confidence indicator decreased more than expected to -22 from -17.
* European retail sales contracted for an eighth month in January, increasing to 44.0 from December’s 41.4, according to the latest Bloomberg eurozone retail PMI. Germany’s Bloomberg retail PMI also contracted further, declining to 41.7 in January from 42.3 in December.
* Germany’s unemployment rose a more-than-expected 56,000 in seasonally adjusted terms to 3.27 million in January, after rising an upwardly revised 33,000 in December, data from the Federal Statistical Office showed. The adjusted unemployment rate rose to 7.8% from December’s upwardly revised 7.7%.
* UK house prices declined a less-than-expected 1.3% m/m in January to an average price of £150,501 after falling 2.5% m/m in December, according to figures from the Nationwide Building Society. House prices plunged a slightly less-than-expected 16.6% y/y in January, after December’s 15.9% y/y drop.
*Japanese retail sales declined for the fourth consecutive month in December, falling a more-than-expected 2.7% y/y, the largest drop since February 2005, following a 0.9% y/y decline in November, according to data from the Ministry of Economy, Trade and Industry. Retail sales fell a more-than-expected 2.0% m/m. Large retailers sales dropped 6.3% y/y.