US economic data for
2008 commenced where it had left off in 2007.Worrying! The first trading
day of the year saw December manufacturing data dive to its lowest level
in 5 years and November new home sales fall by 9% month on month. At
weeks end, the US Labor Department announced that official US
unemployment had jumped to 5% in December from 4.7% in the previous
month, the biggest month on month increase in two years. Stock
investors’ were spooked and the first trading week of 2008 saw the Dow
lower by 4.2%, the S&P 500 by 4.5% and the Nasdaq down by 6.4%.
Euro-Zone money supply for November jumped to 12.3% (the fastest pace in
28 years) with “official inflation” December CPI, estimated to be at
3.1%, far above the official ECB target rate of 2%. UK money supply
growth was forecast at 11.7% in November versus the prior month reading
of 11.1%. Meanwhile UK mortgage approvals slumped further in November,
to their lowest level since January 2005. Spanish inflation jumped to
4.3% in December, the fastest pace in over a decade and even Swiss
inflation rose by the most in 12 years at 2% annualised. The main
European bourses followed their American counterparts, with the FTSE100
index lower by 2% and the French CAC and the German DAX falling by 3.2%.
Out East, lending rose by 19% annualised in Hong Kong during November,
the highest level since January 1999, as the city’s largest banks
slashed interest rates during 2007, stoking retail spending. China’s
inflation rate, at 6.9%, is at an 11year high, whilst CPI in Singapore
and Thailand are running at 6.4% and 7.4% respectively. The Hang Seng
managed a 0.5% rise on the week, whereas Japan’s Nikkei Dow 225 was
slammed for a 4% loss as the market re-opened after a 4 day holiday.
On the currency front the $US index declined by 0.5% to 75.8, whilst the
Yen and Swissie gained 2.9% and 2.3% respectively. German 10 year bond
yields fell by 20 bps to 4.13% and the Japanese JGB by 3.5bps to 1.465%.
Meanwhile the yield of US 5 & 10 year Treasury’s collapsed by 10% and
5.9% respectively, ending the week at 3.17% and 3.85%.
The Commodities Complex started the New Year as 2007 finished, higher.
The crude oil price “touched” the psychological $100 level before ending
the week at $97.9 a barrel, a 2% gain over the week. The $Gold price
added 2.7% to $866oz after touching a new record “spot price” of $869oz
versus the 21 January 1980 record of $850. It has yet to exceed the
record “futures” price of $873 reached on 21/1/1980.
Next week sees more housing data and consumer credit figures released
for the US, together with the latest trade numbers for the US and the
UK. Euro-Zone unemployment for November is released, as is the Zone’s
retail sales and PPI. The ECB and the Bank of England’s MPC also
announce any changes to interest rates.
2007 was a “financial flameout” for the US financial sector, falling by
26%, yet Wall St strategists’ are still advocating a 60%+ exposure to
stocks and an average forecast of a 12% return for stocks in 2008 (taken
from 8 major securities firms.).
For the “Stock market Bulls,” and they are still in the main according
to recent surveys and sentiment readings, the charts are shouting many
warning signs.
“A picture tells a thousand stories”
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