US inflation fell in September, as
evidenced by the PPI number which fell by 1.3% (core rate +0.6%) and CPI
which came in at -0.5%, 2.1% year on year (but core at 0.2% and 2.9%
respectively). To further confuse matters, US RPI (which includes
mortgage repayments) in September touched an 8 year high at 3.6%. The
latter is used to calculate state pension increases. US industrial
production also fell by 0.6% in September, the largest fall in a year
and capacity utilisation fell to 81.9% from last months 82.5%. There was
better news on the housing front, as September new home starts jumped by
5.9%. A slew of Blue Chip companies released their quarterly reports,
with Merck, 3M and Google all pleasing, whilst Caterpillar missed its
forecast and saw its share price lower by 15% on the day. Over the week
that saw the DJIA close above the 12,000 level, an historic high, the
returns were Dow +0.4%, S&P 500 +0.2% and the Nasdaq composite -0.6%.
Euro-lands largest economy, Germany, saw investor confidence fall in
October to its lowest level in 13 years. Meanwhile the second largest
economy, the UK, saw Q306 GDP increase to 2.8% annualised, a faster pace
than expected, no doubt buoyed by the growth in M4 money supply, which
accelerated to a 16 year high in September at 14.5% annualised. Within
the Tech sector, Nokia and SAP disappointed, whilst the UK listed Anglo
Dutch steel group CORUS (formerly British Steel) succumbed to the take
over offer by Indian conglomerate, Tata. Staying with the UK, banking
stocks slipped as Citigroup Chief Executive, Charles Prince stated that
buying a big bank in Western Europe was not on his agenda. Over the
week, the UK FTSE 100 index was effectively level, whilst the French CAC
and the German Dax were higher by 0.4% and 0.5% respectively.
Out East, China’s biggest bank, Industrial & Commercial Bank of China (ICBC),
raised $19 billion, the world’s largest IPO ever. Staying with China,
September retail sales rose by 13.9% from a year earlier and industrial
production also accelerated.
Hong Kong hedge fund assets almost quadrupled by March this year
compared with 2 years ago, according to the Securities and Futures
Commission. The survey also reported that between 30% and 40% of buying
and selling in Hong Kong’s financial markets can be attributed to global
hedge funds. The regions two largest stock markets, Japan’s Nikkei and
Hong Kong’s Hang Seng, both rose by 0.7% over the week.
On the currency front, the $US index fell by 1%. On the upside was the $
New Zealand and the British Pound, which gained 1.7% and 1.5%
respectively. US Treasury bond yields eased, with the 5 and 10 year bond
yield lower by ¼% and ½% respectively.
Within the commodities complex, the $ oil price gained 1.4% but ended
the week under the $60 level at $59.3 a barrel, despite OPEC’s decision
to cut output by 1.2 million barrels per day. The $ gold price rose by
1.5% over the week to $592oz, after briefly touching the $600 level.
Next week is a busy one for the US as more data is released on new and
existing home sales, durable goods orders for September and the latest
consumer sentiment index from the University of Michigan. All eyes of
course will be on the FOMC meeting in respect of interest rate policy
and for any change. Elsewhere, the euro zone current account for August
is due, as is the September Money Supply Data. The UK release mortgage
lending figures for September and Japan announces its September trade
balance and CPI numbers.
With two weeks to go until the US mid term elections, Iraq has become
the main issue between the Republican and Democrat contenders, even
trumping the state of the economy. Negative advertising by both parties
is set to continue and the result is expected to be very tight, so
desperate measures may yet be required by the Bush administration.
“It’s
no exaggeration to say that the undecided could
go one way or another” – George W Bush
[ Back ] [ Up ] [ Next ]
