US economic growth, as measured by GDP, collapsed in Q407 to 0.6% versus
the 1.2% consensus expectation and the prior quarter’s 4.9% whilst
average home prices have fallen by 7.7% year on year at November 2007,
according to the S&P/Case Shiller index. Add to this the December new
home sales which fell by more than expected (again) and the January jobs
data, which showed a fall of 17,000 jobs versus an expected 70,000 rise,
you get a sense that the Country is already in a recession. There was a
bright spot, however, as Durable Goods Orders for December came in at
5.2%, far higher than expected and Microsoft kept the stock bulls happy
as it announced a $42BN bid for Yahoo. The Dow rose by 3.9%, whilst the
S&P 500 and the Nasdaq gained 4.2% a piece.
Turning to the Euro-Zone, December money supply rose to 12.1% against
November’s 11.9% and January CPI increased to 3.2%, more than expected.
Unemployment in the zone for December remained level at 7.2%, whilst
January consumer confidence fell. UK money supply for December remained
at 12.3%, whilst the Nationwide house price index for January eased,
reducing the annualised growth rate to 4.2% and UK manufacturing growth
fell to its weakest since August 2005. The FTSE100 index was higher by
2.7%, buoyed on Friday by mining group, Rio Tinto, who saw 12% of its
equity bid for by Alcoa and Chinalco. The French CAC and the German DAX
were higher by 2% and 2.2% respectively.
Out East, Japanese unemployment in December remained steady at 3.8%,
whilst for the same month, large retail sales and housing starts fell by
more than expected. Meanwhile China, which is suffering its worst snow
storms in decades has seen power shortages thanks to coal shortages and
price controls on commodities, including Oil and Coal. The Hang Seng
fell by 4% over the week, with Japan’s Nikkei Dow 225 lower by 1%.
On the currency front, the $US index slipped by 0.6% to 75.5 whilst the
Swiss Franc rose to a record high against the Dollar. German 10 year
bond yields were slightly lower at 3.92% whilst Japanese JGB yields fell
by 5 bps to 1.42%. US 5 year Treasury yields fell by 1.6% to 2.75%,
whilst the 10 year yield added 0.5%, ending the week at 3.6%.
Within the Commodities Complex the crude oil price fell by 1.6% to $89 a
barrel, despite OPEC announcing their decision to maintain existing
output quotas. The price of Gold and Platinum soared to new record
highs,albet that the $Gold price fell on Friday to make a 1% loss for
the week , ending it at $905oz.
Next week sees December US pending home sales and consumer credit data,
together with employment stats in the form of Q407 labour costs and the
January Challenger job cuts information. There are leading economic
indicator readings due out for Japan, the EU and the UK, with the ECB
and the Bank of England MPC deciding on any interest rate change
There is an old adage for stocks that says,” As January goes, so goes
the year.” Based on this January’s moves, 2008 should be an interesting
year indeed.
“We don’t have a trillion dollar debt because we
haven’t taxed enough; we have a trillion dollar
debt because we spend to much”
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