Financial Update

· TSX had another strong day recovering last week’s losses +302.50
· Dow -16.04
· TORONTO (Reuters) - The Canadian dollar eked out a tiny gain against the U.S. dollar on Tuesday, but fears of a spillover from the U.S. economic slowdown kept it from gaining more traction after domestic retail sales data came in above market expectations.
· Dollar +.05c to $ $98.30US
· Oil +.36c to close at $101.22 US per barrel
· Gold $16.30 to $934.60

Bond Rates: http://www.bankofcanada.ca/en/rates/bonds.html

Consumer confidence in U.S. at 5-year low
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March 26, 2008
Eileen Alt Powell
The Associated Press

American consumers are gloomier about the economy than at any point since just before the U.S. invasion of Iraq, as slumping housing prices and soaring fuel costs depress consumer confidence to its lowest level in five years.

The Conference Board, a business-backed research group, said yesterday its Consumer Confidence Index plunged to 64.5 in March from a revised 76.4 in February. The March reading was far below the 73.0 expected by analysts surveyed by Thomson/IFR and was the worst reading since the gauge registered 61.4 in March 2003, just ahead of the U.S. invasion of Iraq.
Weakening consumer confidence foreshadows weakening consumer spending, which could hurt the already faltering economy.

Meanwhile, the Standard & Poor's/Case-Shiller home price index released yesterday indicated U.S. home prices fell 11.4 per cent in January, the steepest drop since data for the indicator was first collected in 1987. The latest decline means prices have been growing more slowly or dropping for 19 consecutive months.

The U.S. consumer confidence index has been weakening since July and Lynn Franco, director of the Conference Board's research centre, said further decline was likely. "Consumers' outlook for business conditions, the job market and their income prospects is quite pessimistic and suggests further weakening may be on the horizon,'' she added.
Brian Bethune, chief U.S. financial economist with Global Insight in Lexington, Mass., expects the April confidence reading to be dreary, too.

"We expect overall payroll employment to decline for the third consecutive month . . . and there is no immediate relief in sight for gasoline prices or other energy costs,'' he said in a research note.

That, he said, will mean "real consumer spending will barely creep forward in the first half of 2008,'' depressing the economy.

Economist Bernard Baumohl, executive director of the Economic Outlook Group in Princeton Junction, N.J., said consumers' pessimism "reflects the great anxiety that households have because there are just so many uncertainties that everyone faces.''

He believes the economy fell into recession in the current quarter and that growth probably won't resume until the second half of the year, after government stimulus programs have had a chance to work. These include measures by the Federal Reserve to boost credit markets and the plan by the Bush administration to distribute tax rebates to encourage consumer spending.
The Fed said yesterday it had received bids of $89 billion for $50 billion in short-term loans offered in its latest auction to banks. So far, the Fed has made $260 billion in such loans since December to help ease credit conditions.

Baumohl said government actions should help the economy resume growth later this year, but the recovery could be weak. "Even if we emerge from recession sometime this summer, the second half of the year is going to feel bad. For most people, they won't be able to tell if the economy is growing one per cent or shrinking one per cent.''

The Conference Board said there were steep declines in two companion indexes. The present situation index, which looks at current conditions, slumped to 89.2 in March from 104.0 the month before. The expectations index, which looks ahead, dropped to a 35-year low of 47.9 in March from 58.0 in February. The last time the reading was that depressed was in December 1973, when it registered 45.2 amid the Arab oil embargo and Watergate scandal.

In the expectations appraisal, a growing number of consumers said they expected business conditions to worsen over the next six months. On the labour market, consumers expecting fewer jobs increased to 29 per cent in March from 28 per cent in February, while those expecting more jobs declined to 7.7 per cent from 8.9 per cent.

The Conference Board survey is based on a sample of 5,000 U.S. households