US Economy and Currency Update

US Economy Last Week

The Organization for Economic Cooperation and Development said yesterday that losses from U.S. subprime mortgages could eventually total $300 billion, based on an estimated 14% default rate. Mortgage resets are expected to peak in May of 2008 so more will be known as time unfolds. The June eurodollars were unchanged at 96.19.

The Conference Board's index of leading indicators was down .5% in November, weaker than expected. Only three of the ten indicators showed a positive gain with stock prices being the strongest component. Of course, stock prices have not held up since then. The June eurodollars closed up .12 at a new contract high of 96.19.
The U.S. Labor Department said that jobless claims were down 11,000 last week to 330,000.

The U.S. Census Bureau said that housing starts were at an annual rate of 1.229 million units in October, up 3.0% from September's pace and down 16.4% from a year ago. Building permits were down 6.6% in October. March lumber ended down $1.00 at $278.50.

Federal Reserve said that they expect real U.S. GDP to increase 2.45% in 2007, but lowered their estimate for 2008 from 2.62% to 2.15%. They also expect the core rate of inflation to average 1.87% in 2008. The June eurodollars were down .005 at 96.07.
Analysts from Goldman Sachs advised their clients to sell Citigroup, saying that they may have to write down $15 billion of bad mortgages over the next two quarters. Also, a disappointing earnings forecast from Lowe's is pushing the stock market lower. The December U.S. T-bonds closed up 21/32nds at a new contract high of 116.07/32nds.


The National Association of Homebuilders said that their sentiment index was unchanged at 19 in November, the lowest reading since it began in 1985.
Canada's corporations posted C$46.0 billion of after-tax operating profits in the third quarter, up 6.7% on the quarter and up 11.3% from a year ago. Results were especially strong in the banking and oil industries. The December Canadian dollar was up .0023 to $1.0144.

Currency Update Last Week

The U.K.'s Office for National Statistics reduced its estimate of real GDP growth in the third quarter from .8% to .7%. From a year ago, real GDP was up 3.2%. The December British pound ended down .0026 at $2.0585.
In the Euro area (13), industrial new orders were down 1.6% in September, but up 2.0% from a year ago.

Japan's exports hit a record high 7.52 trillion yen in October, up 14% from a year ago. The December Japanese yen finished up .0088 at a new contract high of .9230, helped by its new status as the currency with the least exposure to subprime mortgages.

Retail sales in Canada were down .2% in September, but up 5.4% from a year ago. Excluding autos, sales were up .1% on the month. The December Canadian dollar fell .0049 to $1.0121.

The Bank of England voted 7 to 2 to keep its rates unchanged at the latest meeting.
Consumer prices in Canada were up 2.4% in October from a year ago, down from a 2.5% gain in September. The December Canadian dollar ended down .0006 at $1.0170.
Canada's wholesale sales were up 1.1% in September, stronger than expected. The December Canadian dollar fell .0086 to $1.0176.