Week ending 9th November 2007   

As expected, Citigroup’s Charles Price became the second large US bank CEO to exit, due to astonishingly bad losses. In “Chuck’s” case he did the “honourable thing, falling on his sword,” albeit that a $100m pay off for the lawyer who allegedly had no experience of running a large financial services business, dulled the pain. US economic data enjoyed one glimmer this week, as Q307 provisional non farm productivity was put at 4.9% versus the 3.2% expected. However, against this, the provisional University of Michigan consumer confidence number fell to 75 from October’s 80.9, the lowest in two years, whilst September consumer credit collapsed to $3.7BN from August’s $12.2BN and the expected $9BN. . The Dow lost 4% over the week, whilst the S&P 500 was lower by 3.7% and the Nasdaq by 6.5%.

EU inflation worries were confirmed this week, as the zone’s September PPI number jumped by 0.4% and is now running at 2.7% annualised versus the prior figure of 1.7%. Not enough to worry the ECB however, as its committee left interest rates on hold at 4%, no doubt more concerned that September retail sales came in at 0.3% versus the 0.6% consensus expectations, despite money supply running at an annualised 13%. The Bank of England MPC also left interest rates on hold, at 5.75% as the Nation’s industrial production fell by 0.2% in September, the deteriorating trade deficit and the 0.5% average house price fall in October, announced by HBOS. Banking stocks were marked sharply lower across Europe once again, this week unsettled by rumours that Barclays PLC were facing huge write downs in the value of its “assets” (read debts) Barclays share price fell by 9.1% before being suspended. . The FTSE 100 index fell by 3.5%, whilst the French CAC and the German Dax were lower by 3.4% and 0.5% respectively.

Out East, Japan’s machine orders fell in September, with industrial production down by 1.4%.The OZ Central Bank hiked interest rates by a further 0.25% to 6.75%, despite the impending general election, whilst in New Zealand house sales have slumped by 23% in, October from a year earlier. The Nikkei fell by 5.7%, just “outperforming” the Hang Seng which was lower by 5.5%.

On the currency front the $US index fell by a further 1.1% to 75.4, another all time low, as China’s number two at the National People’s Congress announced that,” China will invest in stronger currencies when diversifying its $1.43 Trillion foreign exchange reserves.” The Yen gained 3.4% and the Swiss Franc 2.8%.10 year German Bund yields fell by 9bps to 4.09%, whilst Japanese 10 year JGB yields fell by 8bps to 1.52%. For the US, 5 and 10 Treasury yields were lower by 4.1% and 1.5% respectively, ending the week at 3.75% and 4.2%.

Within the commodities complex, the $crude oil price jumped by 0.4% to $96.3 a barrel, after touching the $97 level, whilst the. $Gold price rose by 31/4%, to $835oz , with the futures price having touched $847.5 on the 8th November, just $30 below the all time intraday high of $878 set on 21st January 1980.

Next week sees the latest inflation data, as measured by PPI & CPI for the US and the UK, with both countries also releasing their October retail sales figures. The Euro Zone October CPI data is also due, as is the Q307 advance GDP numbers. Japan’s trade balance for September will also be released, as will Q307 GDP.

“Helicopter” Ben Bernanke testified before the congressional Joint Economic Committee this week and he came across as uncertain and somewhat sombre, stating that ,” A lot of the bad or weaker conduits have unravelled,” referring to the $Billions already written off by the Nations Banking industry of late. His “concerns” are likely to have a wider remit than just the banks, as General Motors this week announced its largest ever quarterly loss of $39BN.

“You can never underestimate the stupidity of the general public”

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