US Q107 GDP was revised lower to 0.6%
from an earlier 1.3% figure, as home prices fell by 1.4% during the same
quarter, the first National house price decline since 1991.Consumer
confidence in May, however, rose by more than forecast, surprising given
that personal incomes fell by 0.1% whilst expenditures rose by 0.5%.The
good news had the edge over the week as non-farm payrolls increased in
May by 157,000 and US manufacturers were reported as expanding their
business’s. The Dow gained 1.2% and the S&P 500 1.3%, a new high. The
Nasdaq outperformed its blue chip rivals, by adding 2.2%.
.
Euro-Zone unemployment fell to a record low of 7.1% in April, aided by a
24 year low for France but Q107 Euro-Zone GDP came in at a disappointing
0.6% even though money supply is expanding at 10.4%, the fastest pace in
24 years. UK Q107 GDP, meanwhile, surprised the consensus at 2.9%
annualised. This is likely to fall though as May mortgage approvals
fell, as did net lending on dwellings. Staying with the UK Premier Tony
announced that Colonel Gadafi's Libya was signing a 900 million dollar
oil exploration deal with British Petroleum, marking the UK oil giant's
return to the north African country following a 33-year absence. The
FTSE 100 rose by 1.6%, and the French CAC 40 was higher by 1.8%.
Europe’s higher beta index, the German Dax, jumped by 3.2%.
Out East, the Chinese Government announced an increase of tax on share
trading from 0.1% to 0.3% in an effort to cool down rampant speculation
as 300,000 brokerage accounts are opened per day, bringing the total to
over a 100 million accounts. The announcement coincided with a 6.5% fall
for the Shanghai index, albeit that this “wobble” only lasted for 1 day.
Elsewhere, Japan’s unemployment rate fell to a 9 year low, at 3.8%
whilst Hong Kong exports accelerated in April. Over the week the Nikkei
jumped by 2.7%, whilst the Hang Seng edged higher by 0.4%.
The $US index was little changed at 82.29. Sovereign debt yields marched
higher, with German 10 years higher by 7 basis points (bps) to 4.45% and
Japanese 10 year JGB yields up by 5 bps to 2.7% a 7 month high. The all
important US Treasury Bond market saw 5 and 10 year yields up by 2.8%
and 2% respectively, ending the week at 4.92% and 4.96%.
Within the commodities complex, the $crude oil price rose by 0.5% to
$65.1 a barrel, whilst the $Gold price ended the week at $672oz, higher
by 2.4%, the first positive week in a month.
Next week sees interest rate decisions within the UK and the wider EU,
with the former also releasing May retail sales figures and the latter
retail sales and April PPI. The US announces the April trade balance,
consumer credit and Q107 unit labour costs. Leading economic indicator
figures for April are released by Japan, together with May money supply
data.
.
An article in USA Today reports that the US Federal Government recorded
a $1.3 trillion loss last year, far more than the official $248 billion
IF corporate style accounting standards are used. The continued
deterioration in the finances of Social Security and Government
retirement programs for civil servants’ and military personnel puts this
loss at $11,434 per household, more than Americans paid in income taxes
in 2006. Total Federal liabilities, at $59.1 trillion ($71 trillion if
state liabilities are added), equates to $516,000 for every American
household
“Debt is the worst poverty”
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