George W made
changes at the helm of his administration also,
with his top political advisor Karl Nove and
White House press secretary, Scott McClennan
being ‘shown the door’ in an effort to shore up
W’s historically low ratings. There was not too
much help for him economically either as US core
CPI came in at 0.3% higher in March, the largest
gain in a year. The latest index of leading
economic indicators fell by 0.1%, after a
revised 0.5% fall in February. Equities however,
enjoyed a good week, allegedly due to the
release of the last FOMC minutes suggesting a
near end to the hiking of interest rates, with
the Dow higher by 1.9%, the S&P 500 up by 1.7%
and the Nasdaq ahead by a modest 0.7%.
Turning to Europe, German producer prices held
at their March 24 year high, mainly due to
energy costs and March CPI for the wider Euro
zone eased to 2.2% from 2.3% in February, but
remained above the ECB’s 2% ceiling. French
March consumer spending fell by 0.6%. Nokia, the
worlds top cell phone maker, reported a 21% jump
in quarterly profits, far exceeding
expectations, whilst French auto maker, Peugeot,
announced that it is to close its UK Ryton
plant, axing 2,300 jobs. For the week, Europe’s
main bourses followed their Wall Street
counterparts, ending it at 4½ year highs. The UK
FTSE 100 index gained 1.7%, whilst the French
CAC and German Dax indices jumped by 2.9% and 3%
respectively.
Out East, 2006 economic growth in 2006 for Asia,
Ex Japan, was raised by the IMF to 7.9%, a full
percentage point higher than its September 05
forecast, mainly due to its expectations from
China and India. Meanwhile, the Deputy Governor
of India’s Reserve Ban, Rakesh Mehan, has
expressed concerns over housing and land price
inflation, buoyed by a 30% pa growth in credit.
Interest rates look set to rise. After months,
if not years, of contradictory signals out of
the Japanese Finance Ministry and its Central
Bank, the countries finance minister, Tanigaki,
chastised investors for the recent rapid
increase in long term yields, citing that they
did not understand the BOJ’s signals. The Nikkei
was higher by 1% over the week and the Hang Seng
by 2.9%.
On the currency front, the $US index was hit by
1.8% this week, not helped by the news that
Sweden’s central bank had raised its holdings of
euros to 50% within its currency reserves by
reducing dollars, nor by the reminder provided
by the Russia Finance Minister, Kudrin, that he
and his colleagues around the world are
concerned about the dollars instability. US
treasuries, meanwhile, had their first weekly
rise in the past four, as the 5 and 10 year
yield eased by 0.8% and 0.5% respectively.
Big moves were evident within the commodities
complex, as the $ crude oil price climbed to
$75.2 a barrel, up by 6% on the week and
reaching the $75 level for the first time ever.
Copper and Zinc traded at new record highs also,
but the precious metals showed possible ‘cracks’
as $ silver fell by 21% in a day and $ gold by
6%, albeit that they ended the week higher by
1.2% and 5% respectively.
Next weeks sees GDP data out of the US and the
UK, with the former also reporting the latest
Durable Goods Orders and home sales. Japan
releases its latest CPI unemployment figures.
So there we have it. Stocks have been energised
by a ‘reading of the tea leaves’ that the Fed is
nearly done with higher rates, as inflation is
not a problem. Yet the $ oil price is at an all
time high, as are certain base metals and we
have brokers raising their target for the
majority of the mining stocks they cover.
Something is wrong here and something has to
give. Which of them is it to be?
“Try
to find your deepest issue in every confusion,
and abide by that”
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