US homes entering foreclosure
proceedings during Q107 doubled from a year earlier as property prices
stagnated and owners’ struggled to refinance mortgages. Meanwhile,
Freddie Mac and Fannie Mae said they expect to buy billions of dollars
of sub prime mortgage loans over the next few years in an attempt to
prop up the troubled $1.3 Trillion sub prime market. Whilst this may
start to redeem the two government sponsored companies in the eyes of
Capital Hill, it is worth mentioning that their combined capital is
$79Bn, yet they have guaranteed $3.8Trillion of mortgages. March CPI
picked up to 2.8% annualised compared to 2.5% in February, whilst March
Industrial Production and other leading economic indicators fell. The
Dow was jumped by 2.8%, pushing to a new all time high, whilst the S&P
500 gained 2.2%.The Nasdaq rose by 1.4%
.
Euro-zone CPI was static in March, at 1.9%, whilst the region’s trade
balance in February improved. UK inflation accelerated to 3.1%
annualised in March, buoyed by the increased consumer spending that
rising house prices has encouraged. According to a Bloomberg article,
London “homeowners” gained an average £76,000 on the value of “their”
property in the past year, triple the median salary. UK average earnings
were up 4.6% annualised in February and the official unemployment rate
was at 5.5%. The UK’s FTSE 100 gained 0.4%, whilst the French CAC 40 and
the German Dax jumped by 2.6% and 1.8% respectively.
Out East, Japanese industrial production in February rose to 3.1% from
January’s 2.6%, whist March consumer confidence eased, as did February
leading economic indicators’.Q107 unemployment in Hong Kong, at 4.3%,
remained at its lowest level since 1998, whilst China surpassed the US
as Japan’s main trading partner in 2006.Over the week the Nikkei rose by
0.5%, and the Hang Seng gained 1.1%,
The $US index declined by 0.6% to 82.1 and US Treasury yields also fell.
The 5 and 10 year yields fell by 2.4% and 1.9% respectively, ending the
week at 4.57% and 4.67%.
Within the commodities complex, the $crude oil price fell by 3.4% to $64
a barrel, whilst the $Gold price gained 0.9%, ending the week at $696oz,
a new 2007 high and at a level now only 4% below the 2006 high of
$730oz.
Next week sees the latest US home sales data, Q!07 GDP forecasts and
March Durable Goods Orders. The Fed’s beige book, the most recent report
on pan America economic activity is also released. UK Q107 GDP numbers
are also released, together with the latest PSBR figure, The
Euro-zone’s budget deficit/GDP at year end 2006 is announced, together
with the February ECB current account, whereas Japanese unemployment and
trade data for March plus April CPI are released.
Commercial Banks expand their workforces as a credit expansion gathers
pace and reduce them as the credit expansion contracts. The World’s
largest bank, Citigroup, recently announced plans to slash its global
head count by 5%, 15,000 people. This weekend, ABN Amro is close to
accepting a £48bn bid from British bank, Barclays. A further 15,000 job
cuts from the merged entity looks to be in the offing and the credit
contraction has only just started.
“Sometimes
you have to be evasive”
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