US durable goods orders for April fell
by 4.8%, whilst the Q12006 GDP number was revised higher to 5.3%,
setting the average at 3.6% over the past 4 quarters. New home sales
rose, whilst existing home sales fell by 2% as inventories rose by 5.8%.
US personal incomes were higher by 0.5% in April, but were negated by
the 0.5% hike in inflation. Meanwhile, personal spending increased in
nominal terms by 0.6%. The equity markets bounced after the recent
losses, despite the latest mortgage applications figure which fell by 7%
last week and are down by 17% on a year ago. The Dow gained 1.2%, whilst
the S&P 500 and the Nasdaq indices were higher by 1% and 0.8%
respectively.
Within Euro land, German CPI for May eased to 1.9% from April’s 2% and
German Q106 GDP came in at 1.6% annualised. Meanwhile Q12006 GDP for the
UK was at 0.6%, or 2.4% annualised, with the pace of household spending
down sharply. An interesting article in the Financial Times on private
equity groups, reported that the level of leverage employed (debt) is as
high as 5.7 times earnings. Over the week, the UK FTSE 100 index gained
2.4%, whilst the French CAC 40 and the German Dax indices rose by 2%
each.
Out East, China’s 2nd largest bank, Bank of China, saw its IPO
oversubscribed by anything from 16 to 70 xs, depending on who you listen
to, valuing it at HK$2.95 billion ahead of the 1st June trading debut.
Elsewhere, the auction to build Singapore’s first casino resort was won
by Las Vegas Sands, which owns the Venetian in Las Vegas. The regions
main indices, Japans Nikkei Dow 225 and the Hang Sang, fell by 1.1% and
2.6% respectively over the week.
On the currency front, the $US index rose by 0.5%, with the $NZ and $
Canadian higher by 2.4% and 1.8% respectively. Sovereign debt yields
eased, with the US treasury 5 year yields lower by 0.4% whilst the 10
year remained level.
With the commodities complex the $ oil price jumped by 3% to $71.4 a
barrel, whilst the $ gold price eased by 0.8% ending the week at $653oz.
Next week sees a holiday shortened trading week for the UK and the US
due to public holidays. Investors will eagerly await the release of the
FOMC minutes from their 10th May meeting for any further evidence of a
pause in interest rate rises. US and Japanese unemployment data are
released as is Q106 GDP and May CPI for the Euro zone. The UK gets to
see the latest information on house prices from the Nationwide.
Senior Enron executives, Kenneth Lay and Jeffrey Skilling were found
guilty of fraud and conspiracy and are likely to each face at least 20
years jail time. Quite ironic that during this same week, it was
reported that President Bush has granted his National Director of
Intelligence the authority to exempt any publicly traded corporation,
working on national defence or security issues, from reporting
requirements under the 1934 National Securities Act. In Enron’s case,
they fiddled the returns but at least there were returns to scrutinise.
“We
know you are a man of integrity, but this is
different. This is business”
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