Need To Know News

TSY secretary Hank Paulson, speaking in Frankfurt, gives a sneak preview of his upcoming speech in London on Wednesday:

* The speech, covering markets and intervention, will give more detail on the FED’s expanded role as a regulator of macroeconomic stability

* Regulation must be paired with market discipline

* There have been few differences between the responses of the FED and European policymakers toward the credit crunch

* Commenting on his meeting in Moscow: believes Russian leaders share his view that Crude prices are driven by supply and demand, rather than speculation

RBC, Visa, CIBC, and JPMorgan could face a class-action suit over improperly cashing in on the rising dollar, according to allegations.

The lead plaintiff, Robert Smith — a Texan who runs Hill Country Custom Cycles — has filed a suit in California on behalf of American retailers that accept Visa credit cards. His suite alleges that the banks are skimming too much money on payment reversals for fraudulent cross-border purchases, by using exchange rates at the time of the reversal rather than the exchange rate at the time of the fraudulent purchase.

Although the suit was filed earlier this month it has not been certified or approved by a judge yet.

In spite of better-than-expected April GDP this morning (0.4% vs. 0.3% expected), a new record in Crude, and a weaker dollar, the loonie has been sinking since late morning. Investors appear to be more focused on the pressuring effects of rising oil prices on consumer demand, pushing USD/CAD up 75 pips to 1.0183. EUR/CAD is up 72 pips to 1.6037.

Johnson Redbook Retail Sales for the week ended June 28 will be released tomorrow at 8:55am EDT. Sales in the week ended June 21 were up 2.8% y-o-y week, up 2.4% y-o-y month, and down 0.7% m-o-m.

ICSC/UBS Chain Store Sales were down 0.6% for the week June 21. Sales were up 2.2% y-o-y week, up 1.6% y-o-y month, and up 0.6% m-o-m.

Redbook sales for the week ended June 14 rose 2.3% y-o-y week, increased 2.2% y-o-y month, and fell 0.9% m-o-m.

Monthly figures are seasonally adjusted, while y-o-y figures are not. There are no estimates for the Redbook Index, as weekly retail data are highly volatile.

USD is enjoying a modest rebound, as energies have pulled back, and is now trading higher vs. all major currencies after being flat for most of the day with the USD Index up 0.25%. June Chicago PMI outperformed its peer manufacturing indices in June, which combined with a prices paid index reading of 87.5 helped provide support for the greenback. Fed Fund futures are unchanged and reflect a 75% likelihood the FED will leave rates unchanged in August.

EUR/USD is down 0.38% and is trading just above its intraday low at 1.5735. Cable is down 0.2% to 1.9906, EUR/JPY is down 0.3% to 167.09 and GBP/JPY is down 0.18% to 211.40.

USD/JPY has held onto marginal gains since lunch and may post its first increase in 5 days. USD/CAD is very well bid, Up 0.7% to 1.0177.

Also of note, the short end of the yield curve is selling off in full force with the 4wk bill yield up 22bps to 1.59% and the 3-month bill yield up 11bps to 1.77%.

Construction spending is expected to decline 0.5% in May following a 0.4% decline in April and a 0.6% decline in March. Private residential construction fell 2.3% with single-family units down 4.4% following a 4.6% decline in March. Private non-residential construction increased 1.6% in April while public construction fell 0.3%.

Further declines in private residential construction are expected to drag on construction spending in May, netting out potential increases in private non-residential and public construction. The May employment report revealed a 1.2% decline in the construction hours-worked index.

Government stimulus checks are unlikely to have any impact on construction spending as most houses still cost more than $600, despite recent declines in prices. Extended weakness in most consumer confidence data also suggest a rough buying environment over the period.

Related data:
• May New Home Sales down 2.5%
• May Housing Starts down 3.3%, Building Permits down 1.3%
• MBA Mortgage Applications down an average of 6.2% w-o-w in May

On Friday Petro-Canada announced that its Terra Nova oil field — off Newfoundland’s coast — was coming back on line and would be at full production by early today after 2 weeks of total shutdown for maintenance.

The company had taken the floating production, storage and offloading vessel out of production to make repairs to flaring equipment and valves, and to conduct a full inspection.

The oil field was producing 132k BPD in April before it started experiencing equipment problems.

The Saudi oil minister said global oil markets have enough supply and that speculation is driving recent price spikes.