It was a “recovery week” for most of
the major stock indices, after last week’s drubbing. US economic data
was mixed to positive as January pending home sales fell by 4.1%, whilst
the January trade gap narrowed by 3.8% to $59.1bn and February
unemployment fell to 4.5%, helped by non-farm payrolls which rose by
97,000, albeit the number was below the expected 100K level. Over the
week, the Dow rose by 1.3% whilst the S&P 500 and the Nasdaq gained 1.1%
and 0.8% respectively.
Euro-Zone economic growth accelerated during Q406 to 0.9%, as exports
increased at the fastest pace in 6 years. Retail sales during January
were not so good, however, falling by 1% versus the 1.3% rise expected.
The ECB raised interest rates by 0.25% to 3.75%,after announcing a 9.8%
rise in broad money supply, the largest in 17 years. Meanwhile the Bank
of England’s MPC left rates on hold at 5.25%. Italy’s economy grew at
its fastest pace in 7 years during the final quarter of last year,
prompted by business spending, whilst Denmark’s unemployment rate fell
to 3.8%, the lowest in Europe. The UK’s FTSE 100 gained 2.1%, whilst the
French CAC 40 and the German Dax advanced by 2.1% and 1.7% respectively.
Out East, Japanese money supply rose by 1.1% in February and machine
orders jumped by 3.95 versus the 1.4% forecast. Q406 GDP for Japan came
in at an annualised 5.1% whereas India’s Finance Minister said the
nation’s GDP is likely to surpass $1trillion next year, making it the
3rd Asian economy to pass that figure. Over the week the Nikkei eased by
0.3%, whilst the Hang Seng fell by 1.6%,
The $US index gained 0.7% over the week to 84.21 whilst the Japanese Yen
fell by 1.3% and the Swissie by 1.5%. The flight to the “safe haven
status” of US Treasuries, following last weeks’ stock market swoon, was
short lived, as 5 and 10 year paper suffered their largest one day fall
on Friday this year (one day after the ECB rate hike).
Within the commodities complex, the $crude oil price edged higher by
0.2%, ending the week at $61.8 a barrel, whilst the $Gold price gained
1.2% at $652
Next week sees the latest Inflation numbers out of the US, the EU and
the UK. The latest unemployment figures from the UK and the Euro-Zone
are released, as will US retail sales and Japan’s trade balance and
consumer confidence data.
After a very extended period of “complacency” by investors’, the word
“risk” has returned to their vocabulary, as the recent stock sell off
wiped $2.2 trillion of “value” from the $44 trillion Global stock market
capitalisation. Last weeks ECB rate hike has been followed by the worst
one day fall in US Treasury prices this year to date and the beginnings
of a US housing slump have caused havoc within the sub-prime mortgage
market. Meanwhile US Treasury Secretary, Hank Paulson, on a tour of
Asia, stated, “I see no downturn; US housing is close to bottoming and
the Global economy is sound.” Still, being a politician , what else
could he say?
“I'm
not afraid of storms, for I'm learning how to
sail my ship”
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