US housing data continued to concern,
as the August S&P/Case Schiller median home price fell by 4.4% month on
month and is now lower by 20% since March of this year.Q307 GDP
annualised at 3.9% versus the 3.1% expected, according to the Commerce
Department and American employers allegedly added 166,000 in October,
twice as many as forecast? October consumer confidence fell by more than
analysts’ expected, whilst October manufacturing fell and as mentioned
above, the FOMC cut interest rates by a further 0.25% due to the US
economy being so sound. Aside of the worries hitting the banking sector
this week, Exxon Mobil announced a 10% fall in profits. The Dow lost
1.5% over the week, whilst the S&P 500 was lower by 1.6%. Meanwhile the
Nasdaq , managed a 0.2% gain.
Euro-Zone inflation lurched higher in October, coming in at 2.6% versus
the consensus expectation for 2.3%. The Zone’s unemployment rate for
September rose to 7.3% against the expected 6.9%, which was registered
in September. Turning to the UK, house prices fell for the first time in
two years, according to Hometrack Ltd, stating that London led the way
as October mortgage approvals dropped to a 26 month low. Banking stocks
were marked sharply lower across Europe, including the UK’s Northern
Rock, who apparently has now received £24BN of emergency funding from
the UK tax payer. The FTSE 100 index fell by 2%, whilst the French CAC
and the German Dax were lower by 1.3% each.
Out East, 3 of Japan’s leading banks are expected to take write downs on
their sub-prime exposure of up to six times the initial forecast of
$US44m. Meanwhile the Bank of Japan Governor, Toshihiko Fukui, has
forecast slower economic growth as the countries housing starts slumped
to the lowest level in forty years during September. September
unemployment rose to 4% versus the 3.8% expected and the Bank of Japan
left interest rates on hold, at 0.5%. Retail sales in Hong Kong were up
by 15.8% in September, versus a year ago and by there most since May
2004. The Nikkei ended the week even, whilst the Hang Seng rose by a
modest 0.2%.
On the currency front the $US index fell by 1% to another all time low
at 76.3, whilst the $Canadian jumped by 2.2% to an all time high. 10
year German Bund yields were unchanged at 4.17%, whilst Japanese 10 year
JGB yields fell by 3.5bps to 1.58%. For the US, 5 and 10 Treasury yields
fell by 2% and 1.4% respectively, ending the week at 3.92% and 4.29%.
The commodities complex was higher yet again, as the $crude oil price
jumped by 4.4% to $95.9 a barrel, whilst the. $Gold price rose by 2.8%,
to $806oz , the highest close since January 1980 and up by a staggering
25% since mid August 2007, when the Fed commenced their interest rate
cuts.
Next week sees the latest trade data for the US and the UK, whilst the
latter and their EU counterpart decide on any interest rate change
So, the US Banking system is Healthy, according to Fed Chairman Ben
Bernanke. That must be why Merrill Lynch CEO, Stan O’Neal, was axed
earlier this week, following huge losses on debt instruments which had
soured, albeit that he exited with an obscene $US161m “severance bonus,”
whilst shareholders’ have seen a 40% fall in the stock price this year,
which are trading at the same price as in March 2000. Next up appears to
be the World’s largest money centre bank, Citigroup (share price down by
30% this year and showing no progress since April 1999!) whos board are
meeting this weekend following the Q307 57% drop in profits and this
week’s analyst downgrade. Citi’s CEO, Chuck Prince, looks set to be the
next “casualty” of the “Healthy US Banking System.”
“Trusting our intuition often saves us from
disaster”
[ Back ] [ Up ] [ Next ]
