More mortgage-related losses, economic outlook weakens

Yesterday, markets reacted to more warnings of mortgage-related losses among financial firms. US stocks fell to a two-month low. Treasury yields fell too.

There were some important economic data released yesterday.

Among the more positive for the US economy was the reported fall in the US trade deficit in September. A 1.1 percent increase in exports outstripped a 0.6 percent increase in imports. However, signs of imported inflation continued to accumulate in October with import prices rising 1.8 percent, the biggest gain in a year and a half.

More forward-looking indicators were tilted to the negative side.

Consumer sentiment in the US continued to deteriorate in November. The University of Michigan's sentiment index fell to 75.0 from 80.9 in October.

The Economic Cycle Research Institute's Weekly Leading Index edged up to 140.1 in the week ended Nov. 2 from 139.4 in the prior week. However, the growth rate fell to minus 0.9 percent from minus 0.7 percent to reach its lowest level since 15 September 2006.

The OECD's composite leading indicator for the United States shows a weakening outlook, decreasing by 0.6 point in September. In fact, the September 2007 data indicate a weakening outlook for all the major seven economies except Canada.