US pending home sales, a measure where
the contract has been signed but yet to close, fell by a record 12.2%
month on month in July (-16.1% Year on Year), the lowest level since
September 2001 .Next up was the “Challenger report”, on US job cuts,
which showed that announced corporate layoffs in August rose by 85%
month on month (22%YonY) to 79,500.Unit labour costs have eased and the
“official” unemployment rate for August remained static at 4.6% , but it
was the non farm payrolls data that really rattled investors’, with
recession now being mentioned by some. The Dow erased the week’s gains
plus some on Friday, to end the week lower by 1.8%, whilst the S&P 500
and the Nasdaq fell by 1.4% and 1.2% respectively.
Euro-Zone July industrial production came in at 1.8% y on y, lower that
June, whilst Q207 GDP was as expected at 2.5%. The zone’s July retail
sales measured 0.1% versus an expected 0.3% and the ECB left interest
rates on hold at 4%, still muttering about higher rates to come. The
Bank of England’s MPC also left rates on hold, at 5.75% and UK consumer
confidence in August was steady. The FTSE 100 index fell by 1.8%, whilst
the French CAC and the German Dax gave up 4.1% and 2.6% over the week.
Out East, Japan’s Q207 capital spending fell, as did July construction
orders and housing starts, whilst, Hong Kong enjoyed buoyant retail
sales in July on the back of 20% money supply growth. China ordered
banks to put aside more money as reserves for a seventh time this year
to cool the world’s fastest-growing major economy after inflation surged
to a 10-year high, so now lenders must now set aside 12.5% of deposit,
up from 12%. The Nikkei slipped by 2.7%, whilst the Hang Seng remained
level.
On the currency front, the $US index fell by 1% to 79.91 and below the
psychologically important 80 level, mainly to the benefit of the Yen,
whilst Government debt saw a continued collapse in yields thanks to
nervous investors’ piling in. German 10-year bund yields sank by 12 bps
to 4.12% and Japanese 10-year “JGB” yields declined to 1.58% US
Treasury’s saw the 5 and 10 year yield collapse by 5% and 3.8%
respectively, ending the week at 4.02% and 4.37%.
Within the commodities complex, the $crude oil price, gained 3.6% to
$76.7 a barrel, whilst the. $Gold price rose by 4.2%, ending the week at
$701oz, its first move above $700 since May 2006.
Next week sees July consumer credit released and. the latest trade
numbers for the US, whilst the UK also announce trade data, the August
PPI figures and July unemployment stats. Euro-Zone Q207 labour costs and
unemployment figures are released, along with August CPI. Q207 GDP is
released for Japan.
.
Pressure is building on the Federal Reserve Boss to cut interest rates,
and to cut them hard, but Ben must be feeling a little uncomfortable
when he looks at the “inflationary nose” of the Oil and the Gold price.
The market is torn between sagging stock prices (and a sagging US
economy), collapsing Sovereign Bond Yields’, a dollar in freefall and
the escalating prices for Oil and Gold. Something has got to give and it
will likely be soon.
“A
leader knows what's best to do; a manager knows
merely how best to do it”
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