US consumer confidence fell in May
which is hardly surprising given the housing data of late and the near
doubling of foreclosures over the past year, but retail sales picked up
surpassed consensus expectations. The Fed released its Beige book, which
suggested that growth is moving forward at either a modest, or “slightly
faster,” pace in all 12 of the central bank’s districts, with inflation
well contained. It was a green light for the bulls’ as the Dow rose by
1.6% and the S&P 500 by 1.7%. The Nasdaq gained 2.1%.
.
Turning to Europe, as mentioned above EU inflation in May remained
static whilst in the UK it allegedly fell. Industrial production within
the Euro-Zone fell in April and the regions trade surplus with China
zoomed by 33% during Q107.UK unemployment for April remained at 5.5% as
unemployment claims fell and the Swiss Central Bank raised its interest
rate by ¼% to 2.5%, a 6 year high. The region’s major bourses reversed
last week’s drubbing, with the UK FTSE 100 higher by 3.5%, the French
CAC 40 up 3.8% and the German Dax, jumping by 5.8%, after last weeks 5%
fall.
Out East, Japan’s economy, the World’s second largest, grew at an annual
rate of 3.3% in the first quarter, exceeding expectations. April’s
industrial production eased whilst condominium prices in Tokyo jumped by
20% annualised in May, according to the Real Estate Economic Research
institute. Elsewhere, China’s retail sales are running at an annualised
pace of 15.9%, the fastest in 3 years whilst in Singapore a two floor
penthouse has sold for a record $US18m or $4653 a square foot, to a
foreign buyer. The Nikkei rose by 1%, whilst the Hang Seng gained 2.5%.
On the currency front, the $US index added 0.23% over the week, ending
it at 82.9 whilst the Yen declined by 1.4%. Sovereign debt yields
continued their rise, with German 10 years at 4.65% and Japanese 10 year
JGB yields rising to 1.93%. Yields on the 5 and 10 year US Treasury Bond
market rose by 0.9% and 1%, ending the week at 5.1% and 5.17%
respectively.
Within the commodities complex, the $crude oil price jumped by 5.8% to
$68.5 a barrel, as mid east turmoil increased, whilst the $Gold price
ended the week at $655oz, higher by $6oz or 0.7%.
Next week sees the release of the latest US housing starts and May
leading economic indicators, whilst Euro-land gets to see the June ZEW
economic sentiment measure and the UK release Public Sector Borrowing
data. Japan’s May trade balance is given as are the Bank of Japan
minutes from its 27th April meeting.
.
Derivatives traded on global exchanges rose 24% in the first quarter to
a record $533 trillion on growing use of interest rate futures, currency
futures and stock index options, according to the Bank for International
Settlements, including strong ongoing growth within the CDO market.
Meanwhile rating agency, Standard and Poors, says that investors’ should
demand more transparency and accountability from managers of CDOs,
warning of significant risks in this opaque market.
“Take calculated risks. That is quite different
from being rash”
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