Week ending 30th March 2007   

February US new home sales fell by 3.9%, an “improvement” on January’s 16.6% fall, but marred by the unsold inventory level at 8 months supply and at the largest figure in 16 years. Not surprisingly consumer confidence has eased during March. Durable goods orders for February came in at 2.5% versus the 3.5% expected, whilst Q406 final GDP was at 2.5% annualised versus the forecast of 2.2%. The World’s largest bank, Citigroup, announced its plan to axe 15,000 jobs from 300,000 employees’ who service 200m accounts in over 100 countries. Countrywide, the nations number two sub-prime lender, bowed to the inevitable and filed for bankruptcy. The Dow and the S&P 500 fell by 1%, with the Nasdaq lower by 1.1%
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Euro-Zone money supply in February grew at 9.9%, which is likely to keep pressure on the ECB to raise interest rates, albeit that March CPI came in at 1.9%, within the ECB’s target range. Unemployment fell in France, Norway and in Germany, with the latter’s at 9.2% in March, a 6 year low. French housing starts plunged by 15.1% during the 3 months to the end of February, the largest drop since January 2001. Staying with housing, UK house prices rose by 0.4% in March, according to the Nationwide and lower than the 0.7% expected, whilst Q406 GDP for the UK came in at 0.7% versus the forecast 0.8%.The UK’s FTSE 100 eased by 0.5%, whilst the French CAC 40 remained level and the German Dax rose by 0.25%.

Out East, Australian household debt looks set to reach a record $A1trillion by mid 2007, which equates to $50,000 for every one of the countries 20.8m citizens. Japan’s unemployment rate was unchanged in February, at 4%, whilst March CPI came in at -0.1%, raising the spectre of deflation once more.Over the week the Nikkei fell by 1.1%, and the Hang Seng gained 0.6%,

The $US index eased by 0.5% to 82.7, whilst US Treasuries also eased over the week with the 5 and 10 year yields rising by 0.6% and 0.8% respectively

Within the commodities complex, the $crude oil price jumped higher by 5.7% at $65.9 a barrel, unsettled by the Iran situation whilst the $Gold price gained 1%, ending the month at $664oz.

Next week sees the latest leading economic indicators for the UK, the Euro-zone and Japan and the latest quarterly Tankan survey for Japan. The US unemployment number for March is due, as are February pending home sales and March vehicle sales. Q406 UK mortgage equity withdrawals are announced just prior to a Bank of England MPC decision on interest rates.

The Dow Jones Industrial Average has ended with its first quarterly loss since Q205 and is marginally lower than at the start of 2007. Talking of margin, NYSE margin debt, at $290bn, has finally passed the record level of March 2000 despite the nominal Dow being only marginally higher than it was seven years ago.

“Look carefully, even if it is painful, at what is actually there in front of you”

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