Week ending 10th March 2006      

Turning to the US economy, January’s trade deficit was reported at a record $68.5 billion, 17.5% higher than a year ago. January factory orders fell by 4.5%, the worst monthly fall since mid 2000. Non farm payrolls for February grew by 243,000 and the ‘official’ unemployment rate was put at 4.8% versus 4.7% in January. Stocks put in a mixed performance over the week, as the Dow gained 0.4%, the S&P 500 index lost 0.5% and the high beta Nasdaq fell by 1.8%.

European politics took a further twist as prosecutors in Milan demanded that Italy’s Berlusconi and David Mills, a lawyer married to British minister Tessa Jowel, should stand trial for bribery and corruption. The latter may be left on his own to face the music as the Italian Prime Minister schemed himself a ‘get out of jail free card’ with a life time guarantee, a while back. Elsewhere, the Bank of England’s MPC left interest rates on hold at 4.5%, HSBC presented the largest profit ever for a UK bank, up by11% to $21 billion, albeit that a change of the companies accounting policy flattered the figures. Staying with the UK, the London Stock Exchange, fresh from seeing off the unwanted attention from OZ, received an unsolicited $4.1 billion bid from Nasdaq. Over the week, the UK FTSE 100 gained 0.8%, whilst the French CAC 40 and the German Dax indices were higher by 1.6% and 1.5% respectively.

Out East, the Bank of Japan announced an end to its ‘loose monetary policy’ of the past 5 years, but left interest rates at 0%. Turning to Hong Kong, the latest statistics state that retail sales reached HK$21.2 billion in January, up by 11.6% year on year. Investors greeted the former news positively as the Nikkei jumped by 2.9% over the week. Not so with Hong Kong, as the Hang Seng index fell by 2.2%.

On the currency front, the $SU index gained 1.9% and managed a two week high against the Japanese Yen, whilst US treasury yields traded higher once again. Over the week, the 5 and 10 year yield(s) were higher by 1.2% and 1.5% respectively, both ending it broadly level at 4.77%.

The commodities complex was volatile, with the CRB index down by 3.6%. The $ oil price lost 2.9% to end the week at $61.8 a barrel, as the 140th meeting of OPEC left production at current levels. The $ gold price fell by $24 or 4.1%, to end the week at $542oz.


Next week will release the latest retail sales data for both the US and the UK and inflation figures for both the US and the Euro zone. The US congress rises for their Easter recess on the 17th March with little sign, to date on the US treasury getting their rise in the debt ceiling.

“Inflation is one form of taxation that can be imposed without legislation”

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