U.S. pending home sales for March fell in line with expectations on Wednesday morning, declining 1.0% month-over-month, according to the National Association of Realtors. February's 1.9% decline was downwardly revised to a 2.8% decrease.

The PHSI now stands at 83.0, a new all-time low, down from a revised 83.8 in the previous month and indicating a 21.7% decline from March 2007. Leading the declines was pending home sales in the Midwest, which pulled back 10.4%.

"The downtrend in sales remains firmly in place. Don't hold your breath for a recovery in the U.S. economy if it depends on a revival in the US housing market," Dimitry Fleming from ING wrote in a client note.

Surprising to the upside, seasonally adjusted U.S. consumer debt rose $15.3 billion in March, according to data released from the U.S. Federal Reserve, which also showed that total consumer credit rose to $2.558 trillion. The change was above the consensus for a $6.0 billion increase, after February's upwardly revised gain of $6.5 billion from $5.2 billion.

U.S. first-quarter unit labour costs increased slower than expected at an annual rate of 2.2%, while nonfarm productivity increased faster than anticipated at an annual rate of 2.2%, preliminary data from the U.S. Bureau of Labor Statistics showed. The consensus forecast of economists was looking for an increase of 2.6%, following the upwardly revised 2.8% gain in the fourth quarter of 2007, and for nonfarm productivity to increase 1.5% following Q4's downwardly revised 1.8% pickup.

"The report provided a somewhat favourable outlook for U.S. inflation as moderating labour costs in combination with the improvement in labour productivity may go some way in easing the inflationary pressures that appear to be gaining some ground in the U.S. economy," noted Millan Mulraine, an economics strategist from TD Securities.

An auction of $15 billion 10-year Treasury notes drew a high yield of 3.937% allotted to 39.63% of bidders. The high yield was above the "when issued" yield of 3.930% prior to the announcement. The median discount rate was 3.883% and the low yield was 3.82%. The bid-to-cover ratio was 2.21.

U.S. crude oil stockpiles increased by 5654k barrels in the week ending May 2 against expectations for a 1625k increase, according to data released by the Department of Energy. Gasoline inventories were expected to rise by 100k barrels but increased by 794k. Distillate inventories decreased 107k against expectations for an 1100k rise. Refinery utilization decreased by 0.41% to 85.0% of operable capacity. Utilization was expected to increase 0.60%. Despite the higher-than-forecast build, Nymex crude oil reached a new high of $123.80 a barrel.

Fed Governor Randall Kroszner said rising mortgage foreclosures are an "urgent problem" and called on Congress to pass a Fannie Mae and Freddie Mac regulatory bill. Kroszner noted the delinquency rate has doubled in the past year and that as of February, one in four subprime adjustable-rate mortgages was seriously delinquent, meaning the borrower was either in foreclosure or ninety days or more past due on a payment. He also repeated that lenders should consider mortgage writedowns.

Statistics Canada reported Wednesday a sharp decline in Canadian grain stocks from year-ago levels. The total amount of wheat in storage sank to 10.8 million tonnes as of March 31, the lowest level since 1989. Wheat stocks were down 32.2% from a year earlier and well below the five-year average of 15 million tonnes, the statistical agency reported. The report said the declines were mainly the result of a 25.3% drop in wheat production in the 2007 growing season.

A CIBC report released today says panicked Canadian investors are now hoarding as much as $45 billion that they would normally have at play in the stock market or other investments due to market uncertainty. The most popular destinations are money market mutual funds, which have seen cumulative net sales over the past six months rise eight times faster than last year, and chequing and savings accounts, with balances rising 7% year-over-year.

Germany will not go into recession despite the turmoil affecting the global financial markets, said German Finance Minister Peer Steinbrueck delivering a speech in Berlin on Wednesday. Steinbrueck added that no credit crunch was expected in the region and reaffirmed his confidence in the soundness of the German banking system.

In the overnight, the European Commission approved Slovakia's entry into the euro zone. While euro zone finance ministers will vote on Slovakia's inclusion into the euro area in July, barring any objections, the country will adopt the euro as its currency and become the 16th euro zone state starting in January 2009.

The Commission also released its report on the first decade of the monetary union and said that the euro was not living up to initial expectations, adding that current exchange rates were "excessively volatile" and that global financial pressures were affecting the euro FX rate. The Commission said structural reforms in the euro zone need to be increased and that economic policy co-ordination needs to be improved.

Kansas City Fed President Thomas Hoenig (non-voter) said inflation is becoming embedded in the economy, which may compel a significant interest rate hike. In a speech in Denver, Colorado, Hoenig that consumers are showing an "inflation psychology to an extent that I have not since the 1970s and early 1980s."

Hoenig suggested that the Federal Bank may have no choice but to raise rates as the economy begins to show signs of being at the brink of a recession. Hoeing said, "As the economy recovers and credit conditions improve, however, it will be necessary for the Federal Reserve to remove the policy accommodation in a timely manner."

Consumer confidence in the UK continued to slide in April, with the headline confidence index declining to a reading of 70 from March's 77 reading, Nationwide reported. Economists were expecting a smaller pullback to a reading of 74.

Industrial production for the UK fell 0.5% month-over-month in March, down from the expected fall of 0.1% and February's 0.3% rise, according the Office for National Statistics (ONS). Manufacturing also saw declines, falling 0.5% on a monthly basis, following the previous month's rise of 0.4%.

According the data from Eurostat, euro zone retail sales decreased 0.4% in March on a monthly basis, following the previous month's decline of 0.2%. Economists had expected an increase of 0.2%. February's reading was revised up from a decline of 0.5%.

As expected, the Czech Central Bank held its benchmark interest rate unchanged at 3.75% on Wednesday morning, amidst soaring inflation. A strong demand for the koruna has propelled the inflation rate to 7.1% in March, exceeding the 4% benchmark set by the Czech central bank.

By Stephen Huebl, This email address is being protected from spam bots, you need Javascript enabled to view it , with contributions from Steve Stecyk, This email address is being protected from spam bots, you need Javascript enabled to view it , Geoff Matthews, This email address is being protected from spam bots, you need Javascript enabled to view it , Erik Kevin Franco, This email address is being protected from spam bots, you need Javascript enabled to view it , Patrick McGee, This email address is being protected from spam bots, you need Javascript enabled to view it , Todd Wailoo, This email address is being protected from spam bots, you need Javascript enabled to view it , Adam Button, This email address is being protected from spam bots, you need Javascript enabled to view it , edited by Nancy Girgis, This email address is being protected from spam bots, you need Javascript enabled to view it , and Cristina Markham, This email address is being protected from spam bots, you need Javascript enabled to view it