Markets Moving Higher as Leading Indicators Rise for Third Month

Leading indicators in the US rose 0.7%, slightly ahead of the Bloomberg consensus estimate for a gain of 0.5%, while the previous month saw an upward revision to 1.3%. The indicator has now climbed for three consecutive months for the first time in five years, and may add further evidence to the notion that recovery is mere months away. Large contributors to the move included a 0.22% gain in building permits, along with a rise of 0.35% in the interest rate spread. Also, the duration of unemployment indicator came in lower by more than three-tenths of a percent, signaling improvement in the labor market. Of note, bottoming in the overall index may not necessarily mean markets will move higher from here, as previous market corrections earlier in the decade suggest.

[B]Leading Indicators Index and Dow30 Industrial Average[/B]

Risk appetite is taking center stage today as US dollar continues to trade lower against the majors, while equity markets move higher. The UK FTSE and the Dow30 Industrial index have both broken back into positive territory on the year with some calls for further upside, including a recent forecast out from Goldman Sachs’ for the S&P500 to reach 1060, a move of more than twelve percent from here. Recent data indicates a strong correlation between GBPUSD and AUDUSD relative to the Dow30 equity index, .649 and .714 respectively. Further upside could bode well for such trades, so long as commodities stay firm and financial woes dissipate.

[B]Dollar Performance Relative to Major Crosses (One Day)[/B]