Week ending 8th February 2008   

US economic data continued to concern, in particular the Institute of Supply Management’s Non-Manufacturing index, which measures the potential for growth in the US service sector. It plunged big in January, declining from 54.4 to 41.9, suggesting a recession for what accounts for 75% of the US economy. Retail sales, also an engine of “economic growth” experienced it’s worst month in January in almost 40 years, whilst jobless claims rose, as did the Challenger jobs cuts number. The Dow fell by 4.4%, whilst the S&P 500 and the Nasdaq erased 4.5% a piece.

Turning to the Euro-Zone, retail sales declined by 2.2% year on year in December, the worst in 13 years, whilst the regions PPI accelerated by 4.3% in December. The ECB left interest rates on hold, at 4%, whilst its equivalent in the UK, the Bank of England, cut rates by ¼% to 5.25%, as December manufacturing production fell, as did January Nationwide consumer confidence. The FTSE100 index was lower by 4%, whilst the French CAC and the German DAX were down by 5.4% and 2.9% respectively.

Out East, the OZ central Bank hiked interest rates by another 0.25% to 7%, an 11 year high, stating that inflation was running at its fastest rate since 1991. Japan’s monetary base fell in December, whilst many of the regions financial markets closed early as everyone readied for the 4705th Chinese New Year, the year of the Rat. The Hang Seng fell by 2.7% over the week, with Japan’s Nikkei Dow 225 was lower by 3.6%.

On the currency front, the $US index rallied by 1.6% this week to 76.6 whilst the Euro fell by 2.2% and the British Pound by 1.4%. German 10 year bond yields were slightly lower at 3.86% whilst Japanese JGB yields fell by 1 bps to 1.41%. US 5 year Treasury yields fell by 1.8% to 2.7%, whilst the 10 year yield added 1.5%, ending the week at 3.65%.

Within the Commodities Complex the crude oil price jumped by 3.2% to $91.8 a barrel, whilst the price of Gold added 1%, ending the week at $922oz.

Next week sees the latest trade data for the US,, the UK, the Euro-Zone and Japan, with Q407 GDP numbers released for the EU and Japan. The UK also releases the latest CPI measure, whilst for the US we get to see the latest long term capital flows.

According to an article within the Financial Times, CB Richard Ellis, the World’s biggest real estate adviser, forced sales of property around the world are likely to jump during H208, particularly if credit conditions did not improve. The CEO told the FT that distressed sales of property would increase as many borrowers need to replace shorter-term loans, which is proving difficult.

“Never mind “location, location”, think “liquidity,liquidity"”.

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