Week ending 7th December 2007   

US economic data released this week continued to point to a slowing economy. The latest manufacturing ISM index eased as have retail sales, despite hefty discounts given by retailers and increased consumer credit of late. November non-farm payrolls were better than consensus expectations, at 94,000, albeit that the number was substantially lower the October’s 166,000. The “official” unemployment rate remained at 4.7% The Dow gained 1.9% over the week and the S&P 500 1.6, whilst the Nasdaq rose by 1.7%.

The Bank of England cut its main interest rate by ¼% to 5.5%, whilst the ECB declined to raise rates and left the key rate at 4%. Meanwhile the cost of short term money in both areas continued to rise, with the UK 1 month lending rate hitting a nine tear high at 6.72%, whilst the European 1 month rate rose to the highest level since late 2000.UK consumer confidence for November fell to 86 from 98, no doubt hindered by the average house price fall of 1.1% last month, according to the Halifax, the third consecutive monthly fall. Returning to greater Europe, October retail sales for the Euro-Zone fell by 0.7%, whilst the unemployment rate eased to 7.2% against September’s 7.3%.The FTSE 100 index rose by 1.9% over the week, whilst the French CAC and German Dax gained 0.8% and 1.5% respectively.

Out East, Japan’s Q307 GDP came in at 1.5% annualised versus the expected 2.6%, whilst in China passenger car sales rose by 17% in November from a year earlier, despite the recent interest hikes. India’s exports grew at there fastest pace in 15 years in October whilst the countries money supply is now growing at an annualised 23% clip. The Nikkei gained 1.7 %, with the Hang Seng inching higher by 0.7%.

On the currency front the $US index gained 0.2% to 76.3, whilst the £Sterling and the Yen declined by 1.7% and 1.1% respectively. German Bund yields rose by 7.5bps to 4.2%, whilst Japanese 10 year JGB yields gained 9bps to 1.56%. For the US, 5 and 10 Treasury yields were higher by 2.6% and 3.7% respectively, ending the week at 3.5% and 4.1%.

Within the commodities complex, the $crude oil price eased by 0.5% to $88.3 a barrel, as OPEC announced that they would maintain output at current levels, whilst the $Gold price gained 1.4%, to $800oz ,as researcher GFMS Ltd announced that gold use for jewellery in China jumped by 24% over the past year to 221 metric tons. This compares with 515T for India, the biggest consumer, and 165T for the US.


Next week sees the latest inflation data for the US and the October pending home sales and trade numbers, whilst inflation stats are also due out for the Euro-Zone and the UK. Trade numbers are also released for the UK, the Euro-Zone and Japan, with the latter announcing its latest consumer confidence view.

The main event next week, of course, is the FOMC meeting on Tuesday 11th December, where half of the analysts polled expect a 0.25% interest rate cut, with the other half expecting a 0.5% reduction. Market historians do not have to look to far in the past to see if rate cuts make a jot of difference when the direction of credit is indicative of greed turning to fear.

“Debt is the slavery of the free”

[ Back ] [ Up ] [ Next ]