The euro exchange rate significantly higher against the U.S. dollar, despite the fact that the key indicators of the service sector and manufacturing continues to indicate a contraction in activity. Note that the activity in the private sector in the euro area fell again in May, which is likely to add to the arguments in favor of more action by the European Central Bank and the government, aimed at stimulating economic growth.

According to Markit Economics published data, preliminary composite purchasing managers' index (PMI) euro zone, the indicator of activity in services and manufacturing rose in May to 47.7 from 46.9. The total value exceeded economists' expectations, but the index is still below 50, indicating a contraction in activity. A reading above 50 indicates an increase in activity. We add that there were no signs that the prolonged decline in activity is close to completion. Purchasing managers reported a decrease in the volume of new orders for 22 months in a row, with the rate of decline accelerating the third consecutive month. Note that to change the dynamics of trade could not even better than expected U.S. data.

According to a report from the Ministry of Commerce, at the end of last month sales of new homes increased significantly, thus surpassing estimates of experts, which is a bullish sign for the housing market in the United States. According to the report, the seasonally adjusted sales of new homes rose in April by 2.3 percent, reaching at the same annual rate of 454,000, compared to the upwardly revised figure for the previous month at 444,000 units. Note that according to the average estimate of economists, new home sales should grow to reach 425,000 units, compared with 417,000, which was originally reported in the previous month, reflecting an increase of 1.9 percent. We also add that the monthly growth reflected the 10.8 percent increase in sales of new homes in the West, as well as a 3.0-percent increase in sales in the South. On the other hand, new home sales in the Northeast fell 16.7 percent, while sales in the West declined 4.8 percent. The Ministry of Commerce also noted that the pace of new home sales increased by 29.0% compared to 352,000 in April 2012.

The British pound rose against the dollar, while the published data reflected that the costs of UK households in the 1st quarter grew at the slowest pace in 18 months, despite a slight increase in earnings in the period. This indicates that the British did not hurry to part with cash in an uncertain economic environment. In its second estimate of GDP for the 1st quarter of the UK National Bureau of Statistics (ONS) on Thursday confirmed that GDP grew by 0.3% compared with the previous quarter and by 0.6% compared to the 1st quarter of 2012. According to the ONS, household spending on goods and services in the 1st quarter were up 0.1%. This is the weakest level since the third quarter of 2011, when spending fell by 0.1%.

The Canadian dollar was higher against the U.S. dollar, which helped the presented data that showed that the number of U.S. workers applying for new unemployment benefits fell last week, suggesting that the slow improvement in the labor market. The number of applications - a preliminary indicator of layoffs, fell by 23,000 to a seasonally adjusted 340,000 in the week ended May 18, the Labor Department said Thursday. Economists had forecast 347,000 new claims last week. The indicator of layoffs back to at least five years. Four-week moving average, which smooths out weekly volatility, fell by 500 to 339,500. Claims for the week ending before May 11 were revised up to 363,000 from a previously reported 360,000. In a report earlier this month, the Labor Department said the unemployment rate fell to 7.5% in April, its lowest level since 2008.

European stocks dropped the most in 10 months after the Federal Reserve signaled it will scale back its stimulus if the U.S. economy improves and as data showed Chinese manufacturing shrank.

The Stoxx Europe 600 Index lost 2.1 percent to 303.99 at the close of trading, as all but 26 of the 600 shares in the gauge fell. The benchmark yesterday climbed to its highest level since June 2008 as Fed Chairman Ben S. Bernanke initially told a Joint Committee of Congress in Washington that reducing stimulus too soon would endanger economic recovery.

U.S. stocks fell for a second day. The Standard & Poor's 500 Index yesterday tumbled 0.8 percent, erasing earlier gains, as Bernanke signaled the central bank will scale back stimulus if economic conditions improve. The flow of purchases could be reduced "in the next few meetings" if the Fed is confident gains in the economy can be sustained, he said in response to a question from Representative Kevin Brady.

A release from China showed manufacturing in the world's second-largest economy is contracting for the first time in seven months. The preliminary reading of a purchasing managers' index declined to 49.6 in May from 50.4 in April, HSBC Holdings Plc and Markit Economics said. That missed the 50.4 median estimate. Fifty is the dividing line between expansion and contraction.

National benchmark indexes declined in all 18 western-European markets.

FTSE 100 6,696.79 -143.48 -2.10% CAC 40 3,967.15 -83.96 -2.07% DAX 8,351.98 -178.91 -2.10%

Peugeot, Europe's second-largest carmaker, tumbled 5.3 percent to 6.99 euros. Renault SA lost 4 percent to 59.66 euros, while Daimler AG slid 3.3 percent to 48.05 euros.

Anglo American, the world's biggest platinum producer, slid 5.1 percent to 1,570 pence. Rio Tinto Group, the world's second-largest mining company, fell 4.3 percent to 2,913 pence.

HSBC Holdings Plc, Europe's biggest bank, slid 3.4 percent to 741.8 pence, while UBS AG, Switzerland's largest lender, lost 3.8 percent to 17.32 Swiss francs. An index of banking shares slipped 3.2 percent, the most since September.

Man Group Plc, the world's biggest publicly traded hedge fund manager, slumped 6.4 percent to 124.9 pence, its largest drop since October. Berenberg Bank started coverage of the stock with a sell recommendation. The brokerage said that Man's sales will probably remain slow and its margins will come under pressure as its seeks funds from institutional investors.

ARM Holdings Plc (ARM), whose chip designs power Apple Inc.'s iPhone and iPad, plunged 5.2 percent to 995 pence. Exane BNP Paribas downgraded the shares to neutral from outperform, saying that Intel Corp.'s new platform may enable it to outperform ARM's designs.

SABMiller Plc (SAB) lost 2.1 percent to 3,462 pence. The world's second-largest brewer said earnings before interest, taxes and amortization in the year to March 31 rose to $6.42 billion. That missed the median estimate of analysts that called for $6.46 billion.

Oil prices fell to a three-week low, falling at the same time in the area of ​​$ 101 per barrel, helped by the weak Chinese data on the manufacturing sector, which increased concerns about weak demand. Note also that according to a report provided by HSBC Holdings Plc and Markit Economics, China PMI index for the manufacturing sector fell to 49.6 in May from 50.4 in the previous month.

Experts point out that the pressure of the oil had a statement by Bernanke, who in the course of his speech yesterday, said that the Fed could reduce the pace of bond purchases at one of its next meetings of politicians.

Note that the data for the euro area, which was published today, have had little support to oil prices. Activity in the private sector in the euro area fell again in May, which is likely to add additional arguments in favor of action by the European Central Bank and the government, aimed at stimulating economic growth. According to Markit Economics published data, preliminary composite purchasing managers' index (PMI) euro zone, the indicator of activity in services and manufacturing rose in May to 47.7 from 46.9. The total value exceeded economists' expectations, but the index is still below 50, indicating a contraction in activity. A reading above 50 indicates an increase in activity.

There were no signs that the prolonged decline in activity is close to completion. Purchasing managers reported a decrease in the volume of new orders for 22 months in a row, with the rate of decline accelerating the third consecutive month. As of the end of March, Eurozone GDP declined for six consecutive quarters, which was the longest recession in postwar history. PMI data show that the economic downturn may continue in the 2nd quarter, increasing doubts about the justification of the economic strategy of the euro zone, which in recent years has been directed at government spending cuts and tax increases to reduce budget deficits.

We also add that the drop in oil prices was due to a report released yesterday by U.S. oil reserves, which showed a significant increase in gasoline stocks.

The cost of the July futures on U.S. light crude oil WTI (Light Sweet Crude Oil) fell to 92.91 dollars a barrel on the New York Mercantile Exchange.

July futures price for North Sea Brent crude oil mixture fell $ 0.75 to $ 101.55 a barrel on the London exchange ICE Futures Europe.

Gold prices rose today, helped by the weakening of the U.S. dollar and the statements of high-ranking official of the Federal Reserve, who said that the central bank is in no hurry to start curtailing economic incentives.

The president of the Federal Reserve Bank of St. Louis James Bullard said the quantitative easing remains the most effective tool for mitigating the near-zero rates. Meanwhile, he added that unconventional measures to keep the inflation expectations around the target level. He also believes that we should stick to the current program, adjusting the asset purchases as needed

Experts say that the market is still digesting Bernanke's comments that caught everyone by surprise, but now Bullard went in a slightly different direction by saying that tightening does not come too quickly, which will support lending. In addition, they note that any signs of improvement in the sector jobs in the U.S. is likely to be considered carefully, as it may encourage speculation that the Fed may curtail the incentive program in September.

Gold has also received support from the European shares, which fell on concerns regarding the completion of quantitative easing in the U.S. and weak economic data from China and Europe. As it became known, the activity of the private sector in the euro area fell again in May, which is likely to add additional arguments in favor of action by the European Central Bank and the government, aimed at stimulating economic growth.

According to Markit Economics published data, preliminary composite purchasing managers' index (PMI) euro zone, the indicator of activity in services and manufacturing rose in May to 47.7 from 46.9. The total value exceeded economists' expectations, but the index is still below 50, indicating a contraction in activity. A reading above 50 indicates an increase in activity. Note also that according to a report provided by HSBC Holdings Plc and Markit Economics, China PMI index for the manufacturing sector fell to 49.6 in May from 50.4 in the previous month.

Also today, it was reported that gold holdings in SPDR Gold Trust fell yesterday by 0.3% to 1,020.07, the lowest level in more than four years.

The cost of the June gold futures on COMEX today dropped to 1381.30 dollars an ounce.

Consumer sentiment in the euro area increased for the sixth consecutive month in May to its strongest level since the middle of last year, preliminary data from the European Commission showed Thursday.

The DG ECFIN flash estimate of the consumer confidence indicator for Eurozone came in at -21.9, up from April's final score of -22.3. Economists were looking for a score of -21.8 for May. The latest reading is the highest since July last year, when the figure was -21.3.

The confidence indicator the EU also improved in May, rising to -20.2 from -20.4.

The commission is set to release the final figure for consumer confidence along with the results of the Business and Consumer Survey on May 30.

EUR/USD $1.2800, $1.2850, $1.2895, $1.2900, $1.2925, $1.2950, $1.2965, $1.3000

USD/JPY Y101.00, Y101.50, Y102.30, Y102.50, Y103.30

EUR/JPY Y133.00

EUR/GBP stg0.8600

AUD/USD $0.9750, $0.9800, $0.9850

U.S. stock futures fell as data showed Chinese manufacturing unexpectedly shrank and speculation mounted the Federal Reserve will cut bond purchases.

Global Stocks:

Nikkei 14,483.98 -1,143.28 -7.32%

Hang Seng 22,669.68 -591.40 -2.54%

Shanghai Composite 2,275.67 -26.74 -1.16%

FTSE 6,707.75 -132.52 -1.94%

CAC 3,948.6 -102.51 -2.53%

DAX 8,306.09 -224.80 -2.64%

Crude oil $92.55 -1.83%

Gold $1385.80 +1.35%

U.S. home prices rose again in March, pointing to continued support for economic growth from the housing industry.

Home prices increased 1.3% in March from February on a seasonally adjusted basis, according to the Federal Housing Finance Agency's monthly home-price index released Thursday. Compared with the same month a year earlier, March home prices were up 7.2%.

The index value in March was 199.1, with a reading of 100 equal to the price of homes in January 1991.

The FHFA's index is calculated by using the prices of houses purchased with mortgages backed by government-controlled mortgage companies Fannie Mae (FNMA) and Freddie Mac (FMCC).

The index is roughly the same level as in November 2004.

Rising housing prices encourage builders to break ground on new projects and homeowners to sell their properties and buy new ones. A report Wednesday from the National Association of Realtors said existing-home sales inched up 0.6% in April from a month earlier to a seasonally adjusted annual rate of 4.97 million sales, the highest level since November 2009.

The housing market helped pull the economy into a severe recession, which ended in June 2009. But housing has been a big component of growth of late. Residential fixed investment--which includes home building and household improvements--rose at an annual rate of 12.6% during the first quarter, building on solid gains over the past two years.

Upgrades:

Hewlett-Packard (HPQ) upgraded from Underperform to Hold at Jefferies

Downgrades:

Other:

Boeing (BA) reiterated at Outperform at Oppenheimer, target raised from $105 to $120

First-time claims for U.S. unemployment benefits fell by more than expected in the week ended May 18th, according to a report released by the Labor Department on Thursday.

The report showed that initial jobless claims fell to 340,000, a decrease of 23,000 from the previous week's revised figure of 363,000.

Economists had expected jobless claims to drop to about 345,000 from the 360,000 originally reported for the previous week.

EUR/USD

Offers $1.2950/60, $1.2930, $1.2900/20

Bids $1.2820/00, $1.2790, $1.2770, $1.2750/35, $1.2715/10

GBP/USD

Offers $1.5150/60, $1.5115/25, $1.5100/05

Bids $1.5000, $1.4985/80, $1.4960/50, $1.4910/00

AUD/USD

Offers $0.9800, $0.9780, $0.9750/60, $0.9700/10

Bids $0.962/20, $0.9550, $0.9500, $0.9450

EUR/GBP

Offers stg0.8650/60, stg0.8620, stg0.8600, stg0.8565/70

Bids stg0.8445/40, stg0.8430/20, stg0.8400

EUR/JPY

Offers Y133.00, Y132.50, Y131.95/00, Y131.80, Y131.45/50, Y131.10/20

Bids Y130.20, Y1290.50, Y129.00, Y128.50

USD/JPY

Offers Y103.45/50, Y103.00, Y102.75/80, Y102.45/50, Y102.00/10, Y101.80

Bids Y100.50, Y100.00, Y99.60/50

European stocks dropped the most in almost seven weeks after the Federal Reserve signaled it will scale back its stimulus if the U.S. economy improves and as data showed Chinese manufacturing shrank.

A release from China showed manufacturing in the world's second-largest economy is contracting for the first time in seven months. The preliminary reading of a purchasing managers' index declined to 49.6 in May from 50.4 the previous month, HSBC Holdings Plc and Markit Economics said. That missed the 50.4 median estimate in a survey. Fifty is the dividing line between expansion and contraction.

National benchmark indexes fell in all the 18 western-European markets. The U.K.'s FTSE 100 lost 1.8 percent, its biggest drop since April 5. France's CAC 40 slipped 2.4 percent, while Germany's DAX retreated 2.5 percent.

A gauge of automotive-related companies on the Stoxx 600 tumbled 3.8 percent, for the biggest drop since August. Peugeot, Europe's second-largest carmaker, dropped 5.2 percent to 6.99 euros. Renault SA lost 4.2 percent to 59.53 euros, while Daimler AG slid 4 percent to 47.70 euros.

Shares of commodity companies as a group retreated 3.1 percent. Anglo American Plc, the world's biggest platinum producer, declined 4.6 percent to 1,577 pence. Rio Tinto Group, the world's second-largest mining company, fell 3.5 percent to 2,937.5 pence.

ARM Holdings Plc, whose chip designs power Apple Inc.'s iPhone and iPad, slumped 6.1 percent to 986.5 pence. Exane BNP Paribas downgraded the shares to neutral from outperform, which said the risk/reward on the stock is no longer positive.

Tail calculations:

- 3.30% Jul 2016 Bono; 3.0bps vs 2.1bps prev

- 4.50% Jan 2018 Bono; 3.1bps vs 1.8bps prev

- 5.90% Jul 2026 Obligacion; 1.8bps vs 1.8bps prev

Tesoro releases further auction results:

- Sold 3.30% July 2016 Bono at avg yield 2.442% vs 2.247% prev

- Sold 4.50% Jan 2018 Bono at avg yield 3.001% vs 2.789% prev

- Sold 5.90% July 2026 Obligacion; avg yield 4.54% vs 4.336% prev.

Tesoro sold E4.076bln vs target E3.0bln-E4.0bln

- E1.58bln of 3.30% July 2016 Bono, cover 2.24 vs 2.34 previous

- E1.345bln of 4.50% Jan 2018 Bono; cover 1.94 vs 2.24 previous

- E1.152bln of 5.90% July 2026 Obligaciones; cover 1.55 vs 1.62 previous

EUR/USD $1.2800, $1.2850, $1.2895, $1.2900, $1.2925, $1.2950, $1.2965, $1.3000

USD/JPY Y101.00, Y101.50, Y102.30, Y102.50, Y103.30

EUR/JPY Y133.00

EUR/GBP stg0.8600

AUD/USD $0.9750, $0.9800, $0.9850

Asian stocks sank, with the regional benchmark index headed for the biggest drop since November 2011, as Japanese shares plummeted after China's manufacturing output unexpectedly contracted and the yen strengthened. Futures trading in Osaka was suspended as Japan's Nikkei 225 Stock Average and the broader Topix Index both fell as much as 6 percent, the most since the aftermath of the 2011 earthquake.

Nikkei 225 14,483.98 -1,143.28 -7.32%

S&P/ASX 200 5,062.4 -102.97 -1.99%

Shanghai Composite 2,275.37 -27.03 -1.17%

Jiangxi Copper Co., China's biggest producer of the metal dropped 3.3 percent in Hong Kong.

Toyota Motor Corp. fell 4.1 percent in Tokyo, pacing declines among the region's exporters amid speculation the Federal Reserve may soon wind back stimulus.

01:00 Australia Consumer Inflation Expectation May +2.2% +2.3%

01:45 China HSBC Manufacturing PMI (Preliminary) May 50.4 50.5 49.6

05:00 Japan BoJ monthly economic report May

The Dollar Index touched an almost three-year high before U.S. data forecast to show jobless claims decreased and home sales rose, adding to the case for the Federal Reserve to reduce monetary stimulus. U.S. government data due today may show the world's biggest economy is picking up. The number of applications for unemployment insurance payments probably fell to 345,000 in the week ended May 18 from 360,000 the prior week, according to the median estimate of economists surveyed by Bloomberg News.

Sales of newly built houses increased to a 425,000 annualized rate in April, a three-month high, from 417,000 a separate poll of economists shows.

The greenback strengthened against most major peers and Treasury yields rose to the highest in two months after Fed Chairman Ben S. Bernanke said yesterday the central bank may taper monthly bond purchases if it's confident of sustained gains in the economy.

Australia's dollar slid to an 11-month low as a private report showed China's manufacturing is contracting for the first time in seven months. The preliminary reading of a Purchasing Managers' Index for China's manufacturing declined to 49.6 in May from 50.4 the previous month, HSBC Holdings Plc and Markit Economics said today. The level of 50 is a dividing line between expansion and contraction.

Separate reports from Markit Economics will probably show today that contraction in the German and French manufacturing industries is continuing. The purchasing managers' index for Germany (PMITMGE) is estimated at 48.5 from 48.1 in April and that for France (PMITMFR) at 44.7 versus 44.4, according to economist projections.

The yen gained on speculation its two-day slide was excessive. The yen's 14-day relative strength index versus the dollar was 34, after yesterday touching 30, which indicates an asset's price has fallen too rapidly and may be poised to reverse course. The Japanese currency's RSI against the euro was 39.

EUR / USD: during the Asian session the pair fell to $ 1.2825

GBP / USD: during the Asian session the pair fell to $ 1.5010

USD / JPY: during the Asian session the pair fell below Y103.00

Focus this morning will be on the release of flash EZ PMI data (France at 0658GMT, Germany 0728GMT, EZ 0758GMT). Data viewed as more forward looking with market looking to see if it signals improvement in recently released soft GDP data in Germany and France. Fed Bullard speaks in London at 1005GMT, with US weekly jobless at 1230GMT to provide afternoon focus.

Change % Change Last

GOLD 1,363.80 -13.80 -1.00%

OIL (WTI) 94.19 -1.99 -2.07%

Change % Change Last

Nikkei 225 15,627.26 +246.24 +1.60%

S&P/ASX 200 5,165.4 -14.66 -0.28%

Shanghai Composite 2,302.54 -2.57 -0.11%

FTSE 100 6,840.27 +36.40 +0.53%

CAC 40 4,051.11 +14.93 +0.37%

DAX 8,530.89 +58.69 +0.69%

Dow -80.41 15,307.17 -0.52%

Nasdaq -39.18 3,462.94 -1.12%

S&P -14.2 1,654.96 -0.85%

(pare/closed(00:00 GMT +02:00)/change, %)

EUR/USD $1,2852 -0,41%

GBP/USD $1,5043 -0,70%

USD/CHF Chf0,9790 +0,90%

USD/JPY Y103,12 +0,60%

EUR/JPY Y132,54 +0,19%

GBP/JPY Y155,10 -0,12%

AUD/USD $0,9689 -1,17%

NZD/USD $0,8056 -1,37%

USD/CAD C$1,0370 +0,98%

01:00 Australia Consumer Inflation Expectation May +2.2%

01:45 China HSBC Manufacturing PMI (Preliminary) May 50.4 50.5

05:00 Japan BoJ monthly economic report May

07:00 France Manufacturing PMI (Preliminary) May 44.4 44.8

07:00 France Services PMI (Preliminary) May 44.3 44.7

07:30 Germany Manufacturing PMI (Preliminary) May 48.1 48.9

07:30 Germany Services PMI (Preliminary) May 49.6 50.2

08:00 Eurozone Manufacturing PMI (Preliminary) May 46.7 47.1

08:00 Eurozone Services PMI (Preliminary) May 47.0 47.4

08:30 United Kingdom Business Investment, q/q Quarter I -0.8% +1.7%

08:30 United Kingdom Business Investment, y/y Quarter I +0.8%

08:30 United Kingdom GDP, q/q (Revised) Quarter I +0.3% +0.3%

08:30 United Kingdom GDP, y/y (Revised) Quarter I +0.6% +0.6%

10:05 U.S. FOMC Member James Bullard Speaks

12:30 U.S. Initial Jobless Claims May 360 347

13:00 U.S. Manufacturing PMI (Preliminary) May 52.1 52.3

13:00 U.S. Housing Price Index, m/m March +0.7% +0.9%

13:00 U.S. Housing Price Index, y/y March +7.1%

14:00 Eurozone Consumer Confidence May -22.3 -21.8

14:00 U.S. New Home Sales April 417 429

17:30 Eurozone ECB's Jens Weidmann Speaks

19:30 Eurozone ECB Presiden3t Mario Draghi Speaks

22:45 New Zealand Trade Balance, mln April 718 480