Week ending 16th November 2007   

It was a mixed week for US economic data. On the plus side, pending home sales for September came in higher than expected and October retail sales were at 0.2% versus the expected 0.1%, supported by better figures from Wal-Mart. On the negative were the latest “inflation” figures, which showed October CPI at 3.5%, as forecast but up from last months annualised 2.7% number, together with a 0.5% fall in October’s industrial production and a fall in capacity utilisation in October to 81.7%.Barclays Capital announced a £1.3BN write down on bad debt, far lower than expectations, whilst GE announced a $200m loss on its $5BN “enhanced cash fund.” The Dow gained 1% over the week, whilst the S&P 500 and the Nasdaq added 0.4% each.

EU inflation worries increased this week, as the zone’s October CPI number jumped to 2.6% annualised versus last month’s 2.1%. The Zone’s industrial production for September came in at 3.5% versus the 4.5% expected, whilst Q307 advance GDP was put at the consensus expectation of 2.6%. UK inflation in October also ticked higher, as PPI rose to 3.8& annualised versus September’s 3.3%. The Country’s CPI came in at 2.1% against 1.8% in the prior month. October retail sales fell by 0.1% during October. The FTSE 100 index eased by 0.2%, whilst the French CAC remained level and the German Dax fell by 2.6%.

Out East, Japan’s Q307 GDP grew by 2.6% annualised, higher than the 1.8% forecast, although October Tokyo condominium sales slumped by a further 9.1%, after September’s -19.8%. Elsewhere China’s October trade surplus rose to a record $27.05BN, bringing the first 9 months of 2007 figure to $185.7BN versus the $117.5BN recorded for the whole of 2006, whilst in Singapore, inflation is forecast to accelerate to 5% in Q108, according th the Ministry of Trade and Industry. The Nikkei fell by 2.8%, with the Hang Seng lower by 4.1%.

On the currency front the $US index actually gained 0.6% to 75.86, despite the aforementioned rafter of negative sentiment. The Yen fell by 1.5% easing concerns of the “carry trade” ending..10 year German Bund yields rose by 2bps to 4.1%, whilst Japanese 10 year JGB yields fell by 5bps to 1.47%. For the US, 5 and 10 Treasury yields were lower by 2.1% and 1.8% respectively, ending the week at 3.68% and 4.15%.

Within the commodities complex, the $crude oil price fell by 2.6% to $93.9 a barrel, despite OPEC declining to increase production at their meeting in Riyadh. The $Gold price fell by $47oz, or 5.7%, to $787oz.

Next week sees the latest housing data for the US and the UK, the former releasing October housing starts and permits and the latter house price information. The minutes from the recent FOMC and the Bank of England MPC are also released and UK Q307 provisional GDP. The Euro-Zone current account for September is due as are October department store sales for Japan. Markets are expected to be quite ahead of the thanksgiving holiday weekend in America.

Returning to that “$US problem”, the World is starting to realise just how bad the American debt problem is. Treasury debt hit $9 Trillion this wee for the first time ever. When George W took office in January 2001, this figure stood at $5.6Trillion.

“There has never been a Nation which has managed to devalue its currency into prosperity”

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