US economic data released this week
showed February construction spending falling by less than expected and
that March vehicle sales held up better than anticipated However the
main event was in respect of jobs data, which was not so good, (see last
paragraph below.) Boosted by the April fools day 400 point rally, the
Dow gained 3.2%, whilst the S&P 500 and Nasdaq managed a 4.2% and 4.9%
jump respectively.
Euro-Zone inflation has accelerated to its fastest pace in almost 16
years, up by 3.5% last month year on year. M3 money supply is also
running at 11.4% throughout the zone whilst retail sales have
contracted. The UK M4 money supply is at an even faster pace,
annualising at 12.4% in February.UK February consumer credit (penal
rates) jumped by a higher than expected £2.4BN whilst Q407 mortgage
equity withdrawal (cheaper rate) fell to £7.3BN versus the £10.5BN seen
in Q307.The FTSE100 index gained 4.5%, as did the French CAC, whilst the
German DAX rose by 3%.
Out East, Japanese housing starts in February declined by 5% year on
year whilst March vehicle sales in the Country fell by 3.3% annualised.
Elsewhere official inflation data is accelerating in China, India,
Singapore and Hong Kong with many of the smaller economies also
suffering with rocketing basic food prices, particularly rice. The
Nikkei rose by 3.7% with the Hang Seng higher by 4.2%.
On the currency front, the $US index rallied by 0.5% to 72.02, with the
main beneficiaries being the “commodity currencies”, SA Rand higher by
2.8% and the Canadian Dollar, up by 1.7%. German 10 year bond yields
were little changed, ending the week at 3.94% whilst Japanese JGB yields
increased by 6bps to 1.33%. The US 5 year Treasury yield rose by 3.5%%
to 2.63%, whilst the 10 year yield added a modest 0.3%, ending the week
at 3.48%. An interesting footnote is that Fitch ratings have cut the
rating on monocline insurer MBIA Inc from AAA to AA, saying that the
World’s largest financial guarantor no longer has enough capital to
warrant the highest rating.
Within the Commodities Complex the crude oil price gained 0.6% ending
the week at $106 a barrel, whilst the price of Gold fell by 1.9% to
$914oz.
Next week sees the latest consumer confidence and trade data for the US
and the UK whilst interest rate decisions are due out from the Bank of
England and the ECB.. The Bank of Japan has a policy meeting and the
county’s bank lending for March are released.
The “official” US unemployment rate jumped to 5.1% in March from
February’s 4.8%, the 3rd straight month of job losses with nearly
1million jobs lost, over the past 12 months, from across all sectors of
the economy,. The much watched “Challenger Job Cuts” data revealed a
9.4% year on year rise in March, whilst the March non-farm payroll
shrank by 80,000 jobs, the sharpest drop in 5 years. This is the stuff
of recessions, albeit that nobody wants to hear the dreaded “R word” and
even Benanke is now admitting that the US may be in one.
“A danger foreseen is half avoided”
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