There was news out this week for the
important US housing sector as new home sales exceeded expectations in
December by jumping 5%. Against this bullish figure, however, were
existing home sales, which fell by 0.8% in December (and by 8.4% over
the year, the largest fall in 17 years) and the news of increasing home
loan defaults, particularly within California. Mortgage equity
withdrawal, the life blood of US consumption over the past few years
fell during Q306 to the lowest level since Q403. Stocks were unsettled
by the sell off in treasury bonds and by disappointing numbers from the
likes of Microsoft, McDonalds and Pfizer, not to mention the auto
sector, where Ford Motor Co posted a loss of $12.7BN for 2006, which
equates to a $1925 loss of every car or truck it sold last year. Over
the week, the Dow and the S&P 500 eased by 0.6%, whilst the Nasdaq lost
0.7%.
For Euro-land, the main event was the annual gathering of the great and
good at the World Economic Forum, held at Davos, Switzerland. This
year’s official theme has been the “Shifting Power Equation”, in
particular the growing clout of mass communication and the internet.
Norway’s Central Bank raised the countries benchmark deposit rate by ¼%,
for a third consecutive month, to 3.75% and EU M3, the broadest measure
of money supply has accelerated to its fastest pace in 16 years, way
above the ECBs acceptable rate. Returning to housing, the OECD says that
Spanish house prices are overvalued by as much as 30%. The main bourses
followed Wall St’s lead, with the UK’s FTSE 100 lower by 0.2% and the
French CAC 40 and the German Dax down by 0.6% and 0.8% respectively.
Out East, South Korea’s economy slowed to 0.8% annualised during Q406
versus 1.1% in Q3, whilst China, now the 4th largest economy in the
World, grew at 10.4% in Q406 (and by 10.7% for the year).According to
the FT, Sir Richard Branson’s Virgin Group is in advanced talks to build
a $3bn casino resort in Macao, the Chinese special administrative
region, which overtook the Las Vegas Strip as the world’s biggest gaming
centre by revenues in October last year. The Nikkei gained 0.6% on the
week, whilst the Hang Seng eased by 0.2%.
The $US index moved higher by 0.4% to 85.2 over the week, despite an
announcement that Kuwait, the third largest Arab Oil producer, is set to
abandon its peg against the Dollar, in preference of a basket of
currencies. US Treasury Bond yields moved higher, with the 5 and 10 year
yield ending the week at 4.87% and 4.88% respectively.
Within the commodities complex, the $ crude oil price built on last
week’s rally ending the week at $55.4 a barrel, a 3.8%.gain. The $ gold
price joined in the rise seen within many metals, jumping by 2.25% to
$651 oz.
Next week sees the latest unemployment data out of the Euro zone and
Japan and more on UK house prices. For the US we get to see December
personal incomes and expenditure numbers, January consumer confidence
and Q406 GDP. The main event, however, will be the first meeting of the
FOMC for 2007.
Returning to that WEF meeting at Davos, it would appear that corporate
chieftains are at their most confident in at least 10 years. A survey
conducted by Pricewaterhouse Coopers of 1084 executives showed that 92%
of them were either “confident” or “very confident” about their
prospects for this year
“Confidence
comes not from always being right but from not
fearing to be wrong”
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