The Federal Reserve, which now makes 3
year predictions on a quarterly basis, have revised GDP lower by a
sizable 0.5% to 1.6% and also revised inflation down to 2.1-2.4%,
“justifying” their recent aggressive interest rate cuts. Meanwhile
January inflation, as measured by the CPI, rose by a higher than
forecast 0.4%, annualising at 4.3%! January housing starts were higher
than expected. For the holiday shortened trading week, the Dow rose by
0.3% and the S&P 500 by 0.2%, whilst the Nasdaq declined by 0.8%.
Northern Rock PLC, the first British Bank to “suffer a run” in over a
century last year, was “temporarily” nationalised this week, in the
“best interests of the tax payer, the bank and its depositors’.” Staying
with the UK, January public sector borrowing (the PSBR) deteriated to
£14BN from the prior £7.8BN, whilst M4 money supply for January expanded
by 12.9%, again higher than expected. Retail sales for the same month
jumped by 0.8%, double expectations. For the wider EU, February PMI for
manufacturing and the service sector, held up to consensus forecasts.
The FTSE100 index gained 1.7%, whilst the French CAC rose by 1.1%. The
German DAX gave up 0.4%.
Out East, China’s inflation rate advance in January to 7.1% annualised
the fastest pace in 11 years, with food prices soaring by 18%. Meanwhile
in Japan. Nationwide department sales declined by 2.1% year on year. The
Hang Seng fell by 3.5% over the week, whilst Japan’s Nikkei Dow 225
eased by 0.9%.
On the currency front, the $US index fell by 0.8% this week to 75.5
whilst the Swissie gained 1.6%. German 10 year bond yields rose 5bps,
ending the week at 4% whilst Japanese JGB yields were unchanged at
1.45%. US 5 year Treasury yields were higher by 1.3% to 2.8%, whilst the
10 year yield added 0.2%, ending the week at 3.79%.
Within the Commodities Complex the crude oil price jumped by 3.5% to
$98.8 a barrel, after touching the $100 level once again, whilst the
price of Gold gained 4.6%, ending the week at $945oz.
Next week sees the latest US home sales data, together with the Q407
S&P/Case Shiller home price index and the January durable goods orders.
The latest CPI data and unemployment rates are due to be released for
both the Euro-Zone and Japan, whilst in the UK, Q407 GDP numbers will be
announced.
Home equity lines, which have grown in popularity since the 1980s, have
allowed borrowers’ to “tap” their home equity as property values have
risen, much like a credit card, to pay for all sorts of household
expenditure such as home improvements, cars,childrens education or in
some cases, plain survival. With property prices now falling across most
parts of America, these equity line are being curtailed, threatening
consumption.
“Consumption is estimated to represent 75% of US
GDP.”
[ Back ] [ Up ] [ Next ]
