Week ending 10th February 2006      

Turning to the markets, UK equities were mixed. The latest consumer confidence number, courtesy of The Conference Board rose in January to its highest level since June 2002, but the US trade deficit ballooned to $726 billion in 2005, $202bn of which was with China, a record for a single country deficit. American International Group, the worlds largest insurer, agreed to pay $1.6bn to settle US government and New York state charges that it had engaged in fraud, bid-rigging and improper accounting. Elsewhere, the housing sector took another blow as Toll Brothers reported in its preliminary Q106 results that new sales had collapsed by 29%. Beleaguered auto maker, GM, announced that it is to slash executive salaries, the company’s dividend and will restructure its pension schemes in a bid to stem the companies increased losses. Of the main indices, the Dow shone, rising by 1.2% as the S&P 500 was ahead by a modest ¼%. Bringing up the rear was the Nasdaq composite, which remained level over the week.

G8 finance ministers met up in an icy Moscow to discuss energy security, a topic requested by the host country, Russia. Rather ironic if one remembers that controversy was caused by Russia in early 2006, as it threatened to halt gas supplies to the Ukraine (and by default to a wider Europe). Auto’s were in the news in Europe, as Volkswagen announced that it is to cut 20,000 jobs from its 330,000 global workforce, all being in Germany over the next 3 years. Staying with Germany, the country’s exports rose in December, lifting 2005 exports by 7.5% which is a record and the best in 16 years. Meanwhile, French economic growth slowed to 0.2% in Q4 2005, less than consensus expectations. The Bank of England left interest rates on hold at 4.5% for a 6th consecutive month and there was some conflicting data out of the UK’s two largest mortgage suppliers in respect of house prices. Britain’s biggest, the Halifax, said that prices fell by 0.4% on the month, bringing annual house price inflation to 5.1%. Its largest competitor, Nationwide, states that prices in January rose by 1.4%, the fastest rate in 18 months, bringing the annualised figure to 4.4%. Confused? Over the week, the UK FTSE 100 index remained level, whilst the French CAC 40 was lower by 0.5%. The German Dax rose by 0.8%.

Out East, China’s passenger car sales rose in January, with a year on year jump of 70%. Japanese machinery orders posted their highest gains in over two years, rising by 6.8% in December. Staying with Japan, producer prices jumped by 2.7% year on year last month and bank lending has stopped falling. When combined with consumer confidence levels not seen since mid 1990, it adds to further evidence that the countries long fight against deflation is ending. This did not help the Nikkei, however, as it fell by 2.4% on the week. The Hang Seng remained level.

The $US enjoyed another good week, rising by 0.75% on a trade weighted basis. On the fixed interest front, investors welcomed back the 30 year treasury, but 5 and 10 year yields moved higher over the week by 1.9% and 1% respectively.

Commodities had a turbulent week, with the CRB index lower by 4.1%, assisted by a lower crude oil price, which fell by 3.8% to $62.9 a barrel and by Natural Gas futures, which fell by 15%. The $ gold price fell by 3%, ending the week at $551oz.

Next week sees the latest retail sales figures and mortgage applications for the US and the latest Bank of England quarterly inflation data. Industrial production numbers are due from both the Euro zone and Japan with the latter also releasing the latest GDP figure. Ben Bernanke, the new Fed Governor presents his first monetary report for 2006 and 2007 to Congress.

“Be a good listener. Your ears will never get you in trouble”

[ Back ] [ Up ] [ Next ]