Investor uncertainty was further
undermined by a series of bomb explosions in Mumbai, India, killing at
least 200 people and maiming hundreds more.
It was a bad week for the major stock market indices, naturally
unsettled by the aforementioned Global tensions, but also by the release
of further negative economic data. The US saw its trade deficit widen in
May by $63.8bn and June retail sales dip by 0.1%, mainly due to weak
auto sales. The latest University of Michigan consumer sentiment index
fell to 83 from June’s 84.9. The Q206 earnings season is in full flow,
with warnings from the likes of Dell and EMC, whilst even Alcoa who
reported record earnings, saw its share price slashed by 10%. Not
helping matters were the announcement by the Ford Motor Co to cut its
dividend by half nor the EU commission’s further fine of $357m placed on
Microsoft for anti competitive practices. Over the week the Dow fell by
3.2%, whilst the S&P and the Nasdaq composite gave up 2.3% and 4.4%
respectively.
The ECB cut its estimates for Euro zone growth for the second and third
quarters of 2006, from 2.8% to 2.4% and 2.2% annualised. Tech stocks
took a hit as SAP announced disappointing figures, whilst telecom stocks
were unsettled by the impeding EU legislation which will bite into their
lucrative roaming charges. In the UK, bell weather retailer, M&S,
presented a 4th consecutive quarter of sales growth, whilst UK listed
mining stocks came under pressure due to fears of a slowdown in China.
For the week the UK FTSE100 index fell by 3.1%, whilst the French CAC
and the German DAX dropped by 3.5% and 4.6% respectively.
Out East the Bank of Japan raised interest rates by ¼% from zero to ¼%,
the first move in 6 years. For a nation whose Government is the most
indebted in the World (as a % of GDP for a major economy) it is unlikely
to be the last! Elsewhere, India’s industrial production has accelerated
and China’s trade surplus surged to a new monthly record for any
country, including Japan. The regions two largest equity markets, Japan
and Hong Kong saw their main indices down by 3% and 2% respectively over
the week.
On the currency front the $US index enjoyed a 1.4% bounce, on “safe
haven status.” It was likewise for US treasuries, with the 5 and 10 year
yields falling by 1.6% and 1.4%. Meanwhile the Japanese Yen fell to an
eight year low against Sterling, despite the higher interest rate.
Within the commodities complex, the $Oil price soared by 6.5% to $78.7 a
barrel on the mid-east tension, with the $Gold price also higher by 5.5%
over the week, ending it at 4664oz.
Next week is all about inflation as the US, UK and the wider Euro-zone
release their latest CPI data. June UK retail sales are also announced
as are Japan’s department store sales and US housing starts.
Returning to that G8 meeting, George W’s main agenda appears to that of
“Russian Democracy” or rather the lack of it according to W. As the US
sits on $US Trillions of IOUs, most of which is unlikely to ever be
repaid, Russia has announced a budget surplus of $40Bn in H12006,
allowing the country to completely pay off its foreign debts.
“To
achieve One World Government it is necessary to
remove from the minds of men their
individualism, their loyalty to family
traditions and national identification”
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