A report released this afternoon from Wells Fargo and the National Association of Home Builders (NAHB) suggests that homebuilders were slightly more pessimistic in May. The housing market index fell a single point to 19, breaking expectations of a continuation in the three-month trend at the 20 level.

Manufacturing in the state of New York slid back into contraction in May, coming in at -3.2 following a surprising rebound to growth mode in the previous month, according to the Empire State manufacturing survey from the New York Fed. The decline was led by negative readings in new orders falling to -0.46 from 0.06, inventories falling to -6.52 from -4.17 and unfilled orders rising to -4.35 from -6.25.

The prices paid index was 69.57, above the previous reading of 57.29 with prices received falling to 15.22 from the previous reading of 20.83. The prices paid level was the highest on record since the survey began in 2001. Meanwhile, the employment index rebounded to 1.09 from a flat reading.

The Philly Fed's general activity index improved in May to -15.6 from April's -24.9, led by improvement in new orders, employment, and shipments. New orders came in at-3.7, an improvement from -18.8 in April. Employment improved to -1.0 in May following the previous month's -11.6 reading. Prices paid continued increasing in May at 53.6, compared to April's 51.6 level. This is the highest level since January.

The Organization of Petroleum Exporting Countries (OPEC) cut its 2008 global oil demand forecast on Thursday, based on the assumption that Organization of Economic Cooperation and Development (OECD) nations will see lower consumption patterns over the coming months. In its May Oil Market Report, the cartel's monthly assessment of trends, it notes that full-year global oil demand is now expected to total 86.95 million barrels per day (bpd), against previous expectations of 86.97 million bpd published in its April report.

Industrial production fell more than expected in Thursday's report from the Federal Reserve, which showed a monthly decline of 0.7% in April following a downwardly revised advance of 0.2% in the previous month. Capacity utilization also decreased more than anticipated to 79.7%. Economists were looking for industrial production to fall by 0.3%. Last month's report originally posted a 0.3% gain.

Initial claims for jobless benefits in the United States rose to 371k in the week ending May 10, following an unrevised 365k in the previous week, while continuing claims rose to 3.060 million for the week ending May 3, the Department of Labor reported Thursday. Forecasts were looking for a total of 370k initial claims.

Net long-term TIC flows beat the consensus forecast, totalling $80.4 billion in March, while total TIC flows for the month declined to -$48.2 billion, according to data released by the U.S. Treasury on Thursday morning.

Speaking at the Chicago Fed's Conference on Bank Structure and Competition, Fed Chairman Ben Bernanke said he would strongly urge firms to continue raising new capital. "Recent events have also demonstrated the importance of generous capital cushions for protecting against adverse conditions in financial and credit markets," Bernanke said. "I have been encouraged by the recently demonstrated ability of many financial institutions, large and small, to raise capital from diverse sources."

Canadian sales of manufactured goods were down a larger-than-expected 1.6% from the previous month at just under $50 billion, according to a Statistics Canada report released Thursday. Analysts had expected a more modest slowdown of 0.4% from February. The March results brought total manufacturing shipments for the first quarter to $143.8 billion, down 5.5% from the same period of 2007.

Statistics Canada revised its February results to show a 1.3% increase in manufacturing shipments, down from the previously reported gain of 1.6%. Higher commodity prices helped offset some of the weakness in the manufacturing sector.

On Thursday morning, the Bank of Canada conducted another C$2.0 billion 28-day purchase and resale agreement (PRA) in an effort to "support the efficient functioning of financial markets," drawing an average yield of 3.03%.

Job openings in the United States fell in March from February's numbers, with the openings rate falling to an annual rate of 2.6% from the prior month's 2.7% level, the Bureau of Labor Statistics reported Thursday. In month-over-month terms, the job opening rate was more or less flat, according to the report. As of the last business day in March, there were 3.7 million nonfarm jobs available.

Underground natural gas storage in the United States increased 93 billion cubic feet in the week ending May 9, the Energy Information Administration (EIA) reported. This marked the fourth consecutive increase as inventories are re-built following the winter heating season. The weekly increase was slightly greater than the +89 Bcf consensus estimate of analysts and the 62 Bcf build reported last week. Total gas in storage was 1,529 Bcf, slightly above the average range.

European Central Bank President Jean-Claude Trichet gave a speech on the current financial market correction in Vienna, Austria, and noted the warnings given by public authorities on the under-pricing risks in financial markets. "Equivalent warnings were largely communicated by other central banks, and I had myself, as Chairperson of the global economy meeting of Central Bank Governors, regularly expressed the view that our judgment was that there was a significant under-pricing of risks in general in global finance."

Speaking in an interview with German Newspaper FAZ, Bundesbank Governor Axel Weber said that strong inflation pressures in the euro zone implied that a rate hike from the European Central Bank could not be ruled out.

Monetary policy should be aimed at medium-term price stability, European Central Bank Executive Board member Lorenzo Bini Smaghi said in a speech in Florence, Italy. Bini Smaghi also emphasized that markets should not doubt the independence of the ECB or its priorities.

Deepening and liberalizing trade relations with the European Union is a priority for Canada, said the federal international trade minister David Emerson, but obstacles remain. "We are concentrating quite intensely on attempting to establish deeper economic relations with Europe across a range of policy fronts and ultimately we are striving to get into a new age free trade arrangement with Europe," said Emerson as he addressed a conference on a Canada-E.U. partnership organized by the Public Policy Forum.

New home construction and sales of existing houses are both expected to slow this year, according to a second quarter outlook released by the Canada Mortgage and Housing Corporation (CMHC). Home starts will tumble to 214,650 units this year from 228,343 in 2007, CMHC says, with 7 of the 10 provinces expected to register a lower number of housing starts than last year.

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