The Index of US Leading Indicators fell 0.3% in March marking the fifth decline in the past six months. The drop proved slightly higher than the 0.2% fall forecast polled by Bloomberg and followed a revised narrower decline for February of 0.2% from 0.4%. Six of the ten indicators came in lower with weakness in stock prices, building permits and pace of deliveries leading the move. Reacting to the release, the EURUSD pair continued its decline below 1.30 and was seen trading below 1.29 in the current hour.
Equity markets around the world have rallied significantly in the past six weeks on positive expectations from financial firms and government efforts to narrow the length of recession. Today’s fall across the board comes as investors pay little attention to the Leading Indicators index and focus more on corporate profits and safety in the banking sector. European Markets are lower by more than 3% and oil has fallen more than 7% to below $47 per barrel on fears a prolonged recession will hurt future demand. Banks including Goldman Sachs, JPMorgan and Wells Fargo, have reported positive earnings that helped lift stocks but a change of sentiment is encroaching despite Bank of America’s earnings coming in above estimates this morning. While earnings reports have come in better than expected, investors are concerned that gains from refinancing, profitable trading, and tax changes will not be sustainable and that the negative feedback loop of the worsening economy will lead to rising defaults in safer loans and credit cards.