US Markets Trading Flat on Mixed Data While Euro Rises to 2009 High

US markets are trading near the previous day’s close as investors react to weaker data at home despite some signs of improvement in Japan, Europe, and India. Releases in the US included a [B]revision to first quarter GDP[/B] that came in slightly better at 5.7% but worse than the 5.5% forecast on Bloomberg. [B]Personal consumption[/B] came in at 1.5%, noticeably below the 2.0% previously cited. Also, recently released [B]Chicago PMI data[/B] posted a sharp fall as the region contracted for the 8th month. The figure is important in that its release ahead of national PMI data often acts as a leading indicator for the country as a whole. NAPM’s Milwaukee reading meanwhile posted a slight increase ahead of expectations to 43 from 39, signalling conditions that are deteriorating less rapidly. Final revision to the [B]consumer confidence[/B] reading by the University of Michigan also increased further to 68.7 from a preliminary 67.9. Currency markets are seeing more risk appetite as the US dollar continues to depreciate against several key crosses with the euro hitting a year-to-date record high above 1.41.

Overnight data led to further upside in commodities as Japan posted a 5.2% rise in industrial production, the fastest growth in 56 years, while unemployment rose to a five year high at 5.0%. Elsewhere, India’s economy expanded faster than expected at 5.8% versus a 5.0% forecast which is the lowest growth since the fourth quarter of 2004. Positive data from Europe was also noted as UK house prices surprised estimates with a rise of 1.2% in May according to Nationwide while German retail sales rose for the first time in four months. Crude oil has climbed above $66 per barrel while the Baltic Dry Index, a measure of shipping prices and trade, has soared to the highest level since late September as China fuels demand.

Pessimistic readings linger this morning as several indicators point to continuing distress in markets. Deflation appears more likely than ever in the Euro-Zone as CPI estimate was revised down to break-even from an earlier expectation of 0.6% in April; economists polled had forecast a drop to 0.2%. Also raising concern abroad was a fall in the Japanese housing market which was expected to improve as was confidence in the UK that failed to change. The CBOE volatility index that tracks options in the US also remained above 30 despite touching lower several times in the past two weeks. While the euro has continued into a year-to-date high early in the session, a pullback may be possible as RSI rises above 72, well into the overbought range.