For the US it was a busy week for
housing data, which included conflicting news on February home sales as
sales of existing home rose by 2.9%, whilst new home sales fell by 1.8%.
Go figure. Of perhaps more importance was the January S&P/Case Shiller
home price index which showed a 10.7% fall year on year. Other economic
data released during the week included February durable goods orders,
which fell by 1.7% and were worse than expected. March consumer
confidence also fell by more than economists’ expected. The Dow fell by
1.2%, whilst the S&P 500 gave up 1%. The Nasdaq managed a 0.1% rise.
Within the Euro-Zone French consumer confidence fell to a record low
whilst the Nation’s budget deficit exceeded government estimates.
Mortgage loans to Spanish homebuyers’ fell by 28% in January from a year
earlier, providing further evidence of a stalling housing market.
Housing data for the UK also disappointed as the Nationwide report for
March showed a 0.6% month on month fall for average house prices, the
5th consecutive monthly fall.UK GDP for Q407 was forecast to be 0.6%,
similar to that of the US The FTSE100 index gained 3.5%, as did the
French CAC, whilst the German DAX rose by 3.8%.
Out East, Japanese inflation in February rose at the fastest pace in a
decade, rising by 1% versus the prior month’s 0.7%.The country’s large
retail sales improved by 1.3% against the 0.1% expected, whilst February
unemployment rose to 3.9% from January’s 3.85. Elsewhere, India’s
inflation rate accelerated to a 13 month high, whilst in Singapore,
February inflation remained at the highest level since 1982. The Nikkei
rose by 2.7% with the Hang Seng higher by a staggering 10.3%.
On the currency front, the $US index fell by another significant 1.6% to
71.6, with the main beneficiaries being the Swiss Franc, higher by 2.6%
and the Euro, up by 2.4%. German 10 year bond yields jumped by 17bps,
ending the week at 3.93% whilst Japanese JGB yields were little changed
at 1.27%. US 5 and 10 year Treasury yields leapt by a staggering 8.3%%
and 4.2% respectively, ending the week at 2.54% and 3.47% as the World’s
5th largest pension fund, the South Korean National Pension Service,
said that it would no longer purchase US treasuries as the yields were
too low.
Within the Commodities Complex the crude oil price gained 2.7% ending
the week at $105.6, whilst the price of Gold managed a 1.3% rise to
$931oz.
Next week is a busy one for US employment data, including the latest
unemployment rate and average earnings, plus the challenger job cuts and
March non farm payrolls. February consumer credit and lending on
dwellings are released for the UK, whilst for the Euro-Zone, consumer
and economic confidence numbers are due, as are the latest CPI estimate.
The consensus of Investors’ to the JP Morgan purchase of Bear Stearns
seems to suggest that it’s the “deal of the decade.” However, whilst the
Fed has removed the “poisonous” Credit Default swaps (CDS) from Bear
Stearns book, the CDS issued by BS has now passed to JP Morgan and it
has also removed the paper profits that many hedge funds’ had accrued
(as to get the pay off on a CDS, the company issuing the the bonds
against which the “insurance” is written must default, which BS hasn’t).
Hence many hedge funds are now scrambling to offload other investments
to reduce leverage, whilst attaining performance.
“We were concerned about a run on a bank, but
never imagined we would be the bank”
BS own Economists.
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