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Forex outlook:
An index of consumer confidence in the U.S. jumped more than forecast in May, signaling consumers will continue to spend in the face of record gasoline prices and a slumping housing market. The New York-based Conference Board's index of consumer confidence rose to 108 this month from a forecast of 105.
Rising stock prices and a resilient labor market are encouraging Americans to keep up their spending, which accounts for 70 percent of the U.S. economy. That raises the likelihood the Federal Reserve's forecast for ``moderate'' growth in coming quarters will be borne out. Stocks advanced and Treasury yields were higher after the report. Consumer sentiment is defying forecasts that the housing recession would leave Americans feeling less secure about their finances. A private survey showed home prices in the U.S. dropped in the first quarter as the supply of homes exceeded demand.
Home values nationwide declined 1.4 percent from the first quarter of 2006, the first decline since 1991, according to a report yesterday by S&P/Case-Shiller. The drop in prices over the last year pales in comparison to the 157 percent gain over the previous 15 years. The Conference Board's survey showed the share of Americans who plan to buy a home in the next six months slipped to 2.9 percent from 3 percent. The group's measure of present conditions rose to 136.1 from 133.5. The gauge of expectations for the next six months rose to 89.2 from 88.2. The proportion of people who expect their incomes to rise over the next six months fell to 17.7 percent from 18.4 percent, while those expecting incomes to shrink decreased to 7.8 percent from 8.6 percent. The share expecting more jobs in six months increased to 13.3 percent from 13.2 percent. The survey also showed Americans expect overall business conditions to improve. Those who foresee better conditions in six months rose to 15.1 percent of the sample from 13.8 percent in April.
Another barometer of consumer confidence, the Reuters/University of Michigan survey, also rose this month, according to preliminary figures released May 18. While the University of Michigan and Conference Board surveys generally track each other, the Conference Board's focuses more on labor market conditions. Americans are feeling more secure about their jobs as firings slow and unemployment is at 4.5 percent, the second- lowest in six years. A four-week moving average of jobless claims fell to 302,800 last week, the lowest in more than a year. Average hourly earnings were up 3.7 percent in April from the prior year, the government said May 4.
Consumer spending grew at a stronger-than-expected 3.8 percent rate in the first quarter following a 4.2 percent pace in the final three months of 2006. Consumer spending may slow to a 2.3 percent pace in the second quarter, according to the median forecast of economists surveyed.
Gold: The following are New York midsession prices and market updates for precious metals and copper: Gold futures slipped off earlier highs by the midsession. Earlier, a weakening dollar against the euro pushed gold prices up. But a report showing U.S. consumer confidence improved by more than expected in May helped pull the dollar up from its lows, knocking gold off its session peak. Gold for June delivery on the COMEX division of the New York Mercantile Exchange was $1.40 higher at $656.70 an ounce, and set a higher range between $654.50 and $662.0.
Crude Oil: Crude oil plunged more than $2 a barrel in New York on signs that U.S. gasoline supplies will be adequate to meet summer demand and after Nigerian oil workers ended a strike. ``The statements by the new Nigerian president have been conciliatory and have set the stage for at least a brief honeymoon period,'' said Tim Evans, an energy analyst with Citigroup Global Markets Inc. in New York. ``We are anticipating further builds in product inventories. Finally, there is a bit of an emotional letdown with the start of the driving season.'' Crude oil for July delivery fell $2.05, or 3.1 percent, to settle at $63.15 a barrel at 2:45 p.m. on the New York Mercantile Exchange, the biggest one-day decline since April 9. Prices are 12 percent lower than a year ago. U.S. inventories of crude oil and distillate fuel, a category that includes diesel and heating oil, also rose last week, according to the median of 12 responses in the survey. The department is scheduled to release its weekly report on petroleum inventories May 31 at 14:30 GMT, a day later than usual because of Memorial Day holiday on Monday.
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