Week ending 11th April 2008   

US economic data released this week showed February pending home sales falling by 1.9% month on month, the February trade balance deteriorating to $62.3BN and April provisional consumer confidence at 63.2 versus last month’s 69, according to the University of Michigan survey. After trending sideways for most of the week, the main stock indices lurched lower on Friday as General Electric stunned investors’ with its first profits warning in 5 years, blaming the collapse in the credit markets. GE stock price fell by 14% or $47BN, the worst 1 day performance since the 1987 crash. The Dow lost 2.25% on the week, whilst the S&P 500 and Nasdaq managed a fall of 2.75% and 3.4% respectively.

Euro-Zone forecast Q407 GDP came in as expected at 2.2% and the regions Central Bank, the ECB, left interest rates on hold, at 4%,after their monthly meeting. The UK’s Bank of England MPC cut its base rate by ¼% to 5%, no doubt unnerved by the latest HBOS housing data, which showed average house prices lower by 2.5% in March,, the largest fall since 1992..The FTSE100 index gave up 0.9%, whilst the French CAC fell by 2.1% and the German DAX by 2.4%.

Out East, passenger car sales in China rose by 24% year on year in March, with sales annualising at7.4 million per annum. Meanwhile Japan’s wholesale prices rose at the fastest since February 1981, at 3.9% in March. The Nikkei rose by 0.2% with the Hang Seng higher by 1.7%.

On the currency front, the $US index declined by 0.3% to 71.7, with the main beneficiaries being the Yen and the Swiss Franc. German 10 year bond yields declined by 4bps to 3.91% whilst Japanese JGB yields rose by 4bps to 1.37%. The US 5 year Treasury yield fell by 2.2%% to 2.57%, whilst the 10 year yield eased by 0.3%, ending the week at 3.47%.

Within the Commodities Complex the crude oil price gained 3.7% ending the week at $110 a barrel, whilst the price of Gold gained 1.5% to $927oz.

Next week sees the latest inflation data for the US, UK and the Euro-Zone whilst the latest US housing starts and building permits are released. March consumer confidence and department store sales are due out for Japan.

Returning to that G7 meeting, the IMF, the lender of last resort for countries in trouble, is facing its own economic problems, with officials proposing a reduction of 15 percent of the agency's staff and plans to sell about $11 billion in the institutions' vast gold reserves. It went on to issue an economic outlook that predicted the United States would endure a mild recession this year and that weakness in the world's biggest economy raised the risks of a global recession to one in four. Talk about the,” Blind leading the Blind.”

“It’s a crisis and ideas are scarce.”

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