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In This Issue.

* A look at data...

* Dollar still in control...

* More rate hikes in Brazil...

* New Zealand still growing...

And, Now, Today's Pfennig For Your Thoughts!

They say it's your birthday...

Good day.and welcome to Friday morning. I wanted to begin today with an early birthday shout out to Chuck since his birthday is tomorrow, so happy birthday Chuck. It's another week in the books and spring has officially sprung so let the good times roll. The spell cast over the markets by the Fed was still largely in place yesterday but we did see the effects start to wear off as the day progressed, so let's get this thing started and get you through to the weekend.

We didn't have any big surprises in the data releases from yesterday, but the weekly job reports did come in a little higher from where they were previously. With that said, initial jobless claims from last week increased to 320k but was a little better than the expected 322k. The four week average, which came in at 327k and is typically less volatile, fell to the lowest level since November. Normally we get a revision from the week prior but not this time so that was a bit unusual. The number of continuing claims actually rose by 41k to 2.89 million. During Janet Yellen's post game show on Wednesday, she indicated that broader measures of unemployment as well as labor force participation and turnover will supplement her view on the jobs market.

I don't think it means she is going to hang her hat on every weekly report, but sounds like they will at least be on the radar screen. Next, we had a consumer confidence measure disappoint as the weekly Bloomberg consumer comfort index fell for the first time in six weeks and represented the lowest figure in four months. The sampling of those surveyed were a bit more pessimistic with the measures of personal finances and current economic conditions offsetting the increase of those who felt it was a good time to make a purchase. For the most part, the report was benign. The Philly Fed index actually had a decent jump in March by rising to 9 from last month's dismal reading of -6.3. The gauges of new orders and shipments carried the report while the components of employees, inventories, and delivery times all went lower.

Weather still played a role but this region carries a little more weight than the NY index. Next up, we had sales of existing homes in February come in right where expected but is lower than the results in January. Sales for previously owned homes are counted at closing, but that figure fell to 4.6 million, which is the lowest annual rate since July 2012. The recent declines can be attributed to several reasons which obviously includes mother nature, but higher interest rates as compared to a year ago and higher property values also have a hand in the cookie jar. Home prices on aggregate increased 9.1% according to the National Association of Realtors, but that may not tell the whole story.

The median home price did increase to $189k, but those selling for less than $250k actually fell while those selling for more accounted for the bulk of these higher prices. I also saw a report where investor purchases accounted for 5.2% of property sales compared to 8.2% in the year prior. These figures were referring to the January results but I thought it was a telling stat since investment property transactions were a major player in the housing recovery. While the nominal amount of jobs have improved, wage growth hasn't nearly been as successful and is another reason why I think the housing market will have a tough time breaking out.

And finally, we had the leading indicators from February turn in a much better report card than was expected. This report, which measures the outlook over the next three to six months, increased the most since November by rising to 0.5% from 0.1%. In a related report, the index of coincident or current indicators didn't have the same jump but they did show marginal improvement. The consumer confidence component was a bit lower so that kept a lid on the final score but it was higher so that's what received the focus. There is not data on the docket for today in the US and nothing of any significance elsewhere, so the markets will be trading on their own today.

Looking ahead to next week, we'll have quite a few reports but nothing that has any real teeth. We get more housing data from last month with new home sales, pending home sales, and a price index. We will also see the final revision to fourth quarter GDP and related reports so they shouldn't have much of an impact. The only reports that should get some kind of attention should be Feb durable goods and more regional manufacturing reports. That's the week ahead so the markets will probably get most of their direction from outside the US.

As I mentioned up top, the dollar was still in control yesterday but it didn't have total control. The Brazilian real was somehow able to break free and put up a 1% gain against the dollar while the Mexican peso, Canadian dollar, Aussie, and yen were sitting on the teetering point of gains and losses. With all of the interest rate talk since Wednesday, rate differential has become a bigger topic of conversation and helped to shape the currency line up yesterday. The nations which even have the possibility of a rate hike on the table could continue getting preferential treatment. It happened to New Zealand in the several months leading up to the eventual decision and it was the primary reason for Brazil's rise.

It seems like there is some type of inflation report in Brazil on a daily basis, but the most recent report showed a stronger figure, so bets for a rate hike increased a bit. Prospects of higher interest rates can go a long way in carrying this currency, but the government keeps an active role in providing support as well. We didn't have any positive economic news so this was purely a move driven by interest rate expectations as opposed to something initiated by fundamentals. As you know, this currency doesn't have a steady platform, but it earned the gold star yesterday.

The Swiss National Bank (SNB) met yesterday and said they will stick to their guns as far as the 1.20 per euro cap that is currently in place. For those of you new to this, the SNB decided to put a ceiling as to how high the franc will rise against the euro back on Labor Day weekend of 2011. This was done since Switzerland was a safe haven from the height of the European crisis and the currency was getting significantly disproportionate to the euro. The SNB sound a bit more upbeat and now expects the economy to grow 2% this year while it looks for inflation to remain stable. Even though it goes without saying, they also kept interest rates on hold.

In New Zealand, we saw fourth quarter GDP come in at 3.1%, which was lower than the revised third quarter result of 3.3% but it at least managed to put together back to back quarters over 3% growth. The relatively solid growth is adding to the central bank's concern that inflation would reach the midpoint of the target by the second quarter. Policy makers said growth of at least 2.75% will add to inflation pressures so their forecast of growth rising to 3.9% by midyear supports both the market and the central bank's view the interest rate hike earlier this month isn't a one and done.

After getting absolutely crushed yesterday by fallout from the Fed, gold was able to get stitched up and control the bleeding. At one point, it was actually up a couple of buck, but the damage was already done and just couldn't stand back up. It was trading around $1,328 as I left for the evening and was only down a few dollars at that point. Now that we have the kneejerk reaction form the market out of the way, I think gold has the potential to re-establish its base as we still have geopolitical tensions at work.

As I came in this morning, the dollar has reversed course and is actually lower against most of the majors. The precious metals have even been brought back to life as gold is up about $11 and silver is up nearly $0.30. Both European and US officials have kicked sanctions against Russia up a notch by adding more individuals to their so called black list. In the UK, we saw a larger than expected budget deficit in February as government spending increased the most in nearly a year. Earlier this week, it was announced that austerity was expected to continue for another five years even though the economic outlook has improved, so longer term growth prospects have taken a hit.

For What It's Worth. I found quote from Richard Russell on King World News that I wanted to share: "Can markets be neurotic or hysterical? Markets are made by people, and currently I believe we have a lot of semi-hysterical people in this market. ...Stocks are not cheap. My feeling is that the only bargains around are silver and gold. I bought a batch of American Eagle one ounce silver bullion coins today, on the temporary weakness in silver. I believe silver is the single biggest bargain around, at today's prices. I understand that physical silver is so scarce that the US government is buying silver in the open market in order to mint its coins. On the other hand, my local coin dealer says there's plenty of silver available. But I wonder for how long.

To recap.We didn't have any surprises with the weekly jobs numbers but one of the various consumer confidence gauges fell a bit. The Philly Fed index more than offset the previous month's dismal outing and leading indicators give us a brighter outlook over the next six months. Nothing significant in the data department next week so we'll be looking for direction elsewhere. The Brazilian real was one of the few currencies to post a gain yesterday and New Zealand growth remains above 3% for another month.

Currencies today 3/21/14. American Style: A$ .9083, kiwi .8555, C$ .8892, euro 1.38, sterling 1.65, Swiss $1.1330. European Style: rand 10.8450, krone 5.0792, SEK 6.4187, forint 226.14, zloty 3.0401, koruna 19.8970, RUB 36.2290, yen 102.25, sing 1.2741, HKD 7.7616, INR 60.8950, China 6.1475, pesos 13.2470, BRL 2.3260, Dollar Index 80.10, Oil $99.36, 10-year 2.77%, Silver $20.52, Platinum $1.442.50, Palladium $789.25, and Gold. $1,340.50.

That's it for today.I wanted to take another opportunity to wish Chuck a happy birthday, so this Bud's for you. Chris will be with you on Monday and Tuesday, then I'll finish out the week before Chuck is back at it the following week. Looking ahead, its going to be another shorthanded week for us on the desk as we get a second round of spring breakers. Speaking of Spring Break, the Sunday Pfennig is taking a hiatus this weekend so don't be alarmed when you don't see anything waiting for you this Sunday morning. And with that, I'll wrap it up for today so until next week, Have a Great Day!

Mike Meyer
Assistant Vice President
EverBank World Markets

Posted 03-21-2014 12:51 PM by Chuck Butler
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