Within the US, the credit woes
continued as Goldman Sachs warned of heavy losses in its Global Alpha
Fund, the 3rd of its market neutral hedge funds’ to suffer of late.
Meanwhile July consumer credit fell to $7.5bn from June’s $13.2bn and
the countries trade balance for July came in at -$59.2bn. The latest
consumer sentiment figures were slightly better than forecast but retail
sales in August disappointed by falling by 0.4% versus the expected 0.2%
gain. The Dow gained 2.5%, whilst the S&P 500 and the Nasdaq rose by
2.1% and 1.4% respectively.
Euro-Zone August CPI came in at 1.7% y on y, slightly lower than
expected, whilst Q207 labour costs were higher by 2.5%. European based
hedge funds’ saw more damage this week when it emerged that the flagship
fund of London’s Wharton Asset Management had lost a quarter of its
money in one month whilst a small Swiss-run fund had collapsed.
Wharton’s Y2K Finance fund said “it was suspending calculation of asset
values, withdrawals and subscriptions, until December”. “Official
unemployment” in the UK was unchanged in July at 5.4% whilst average
earnings rose by 3.5%. According to a Rightmove Plc report London house
prices fell by 2.5% in August. The FTSE 100 index rose by 1.6%, whilst
the French CAC and the German Dax were higher by 2% and 0.8%
respectively.
Out East, Japan’s Q207 contracted by 1.2% year on year, worse than
expected, and broad liquidity in August declined. China raised interest
rates for a 5th time since March to 7.29%, a nine year high, after the
recent high inflation number. Meanwhile the Countries money supply
expanded by 18.1% in August. The Nikkei remained level over the week,
whilst the Hang Seng gained 3.8%.
On the currency front, the $US eased by 0.4% to 79.65, remaining below
the psychologically important 80 level, whilst the main beneficiaries
were the commodity linked currencies such as the Oz and Canadian Dollar.
Government yields reversed their trend of late, with the German 10 year
higher by 5 bps to 4.17% whilst US Treasury’s saw the 5 and 10 year
yield spike by 3.9% and 2.2% respectively, ending the week at 4.18% and
4.46%.
Within the commodities complex, the $crude oil price rose by 1.8% to $78
a barrel, whilst the. $Gold price added a further by 1.1%, ending the
week at $718oz.
Next week sees the latest inflation data for the US and the UK, with US
also announcing the August housing starts and leading economic
indicators. The Euro-Zone July trade balance and current account are
released, along with the August Nationwide department store sales for
Japan. The big event, of course, is the 18th September 2007 FOMC meeting
where the latest Bloomberg survey puts the odds of a ¼% cut at 100% and
at 81% for a 0.5% cut.
“The worst U.S. housing slump in 16 years may lead mortgage companies to
eliminate almost 100,000 jobs, more than double the number already cut
this year. As many as 20% of the nation’s real estate loan officers and
mortgage brokers will be fired, according to Josh Rosner, managing
director at investment research firm Graham Fisher & Co. That’s in
addition to the 10% reduction from December to July ‘Originations are
going to decline dramatically,’ Rosner said. ‘We are just at the
front-end of seeing the large banks and investment banks start to cut
their capacity”
“Debt is the worst poverty”
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