Turning to the
US economy, a staggering 40% of all existing
home sales in 2005 were 2nd home purchases,
predominantly for investment purposes, according
to the national Association of Realtors!
Meanwhile, US home sales fell by 0.8% in
February. March job layoffs fell by 26%, falling
to an 11 month low, according to a survey
released by Challenger, Gray & Christmas, which
gelled with the March non-farm payrolls figure
released on Friday, showing that pay rolls rose
by 211,000 and the official unemployment rate at
4.7%, a 5 year low. Stocks had a bumpy week,
initially buoyed by the economic data but then
tempered by rising bond yields and concerns over
higher interest rates. The Dow and the S&P 500
blue chip indices were about level over the
week, as was the Nasdaq composite.
Euro land interest rates remained on hold, with
the UK base rate at 4.5% and the ECB leaving
rates at 2.5%. The latter certainly surprised
most pundits and the market, which had been
pushing the Euro higher against the Dollar.
Perhaps it was more to do with the European
Finance Ministers press release at a meeting in
Vienna, which cautioned against a rise, due to
high energy prices and unemployment levels.
Meanwhile manufacturing in the dozen European
countries that share the Euro, expanded at the
fastest pace in over 5 years and saw February
unemployment at 8.2%, the lowest since May 2002.
UK February manufacturing production fell by
0.2%, weaker than expectations. Over the week,
the UK FTSE 100 index rose by 1% buoyed by the
mining sector and it managed to hold above the
6000 level, whilst the French CAC and German Dax
were lower by 1% and 0.3% respectively. The BMW
Group saw March sales up by 13.5% year on year.
Out East, the Bank of Japan’s Q1 Tankan report
was net positive on balance and indicated
optimism amongst business executives on the
Japanese economy. However, manufacturers are
facing capacity shortages and the nation’s
employers are facing staff shortages not seen
since the bubble era of the late 1980’s, which
strengthens the case for an early end to the
zero interest rate policy. The Singapore economy
grew at an annualised 9.1% during Q1 2006 and
China is on course to grow at 8% this year,
according to the countries deputy finance
minister, Li Yong. Nobody seems to mention that,
if correct, 8% is actually a 10-15% slow down on
last year, but perhaps this is being churlish?
Over the week, Japan’s Nikkei Dow 225 rose by
3%, whilst the Hang Seng rocketed by 4.2%.
On the currency front, the dollar index managed
a modest gain of 0.4% over the week, after a
large short term trend change versus the Euro
transpired after the ECB rate decision and it
was another good week for the commodity backed
currencies. Sovereign debt yields continued
their March higher, with the US 5 and 10
treasury yields up by 1.4% and 2.2%
respectively. The US longer dated debt yield, as
evidenced by the 30 year bond, rose above the 5%
level for the first time since September 2004.
Within the commodities complex, $ oil rose by
0.4% to $67.4 a barrel as the $ gold price ended
a volatile week level, at $589oz. The price of
copper made another 25 year high, with $ gold
and silver also at 25 and 22 year highs.
It will be a holiday shortened trading week on
many exchanges next week due to the Good Friday
extended Easter week end. During it however, we
get to see the latest trade figures out of the
US and the UK, liquidity data out of Japan and
GDP for the Euro zone for Q4 2005.
We started with George W so let us finish with
him. Aside of opening his mouth on economic
matters, which appear to have coincided with the
Wall St market reversal on Friday, the
unfortunate announcement that Bird Flu has
arrived in Scotland has encouraged scare stories
on the internet. Amongst them is the one that
George W is planning to bomb the Canary Islands
and then Turkey. Oh dear!
“There
may be virtual reality, but there is no such
thing as virtual happiness”
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