This week Goldman Sachs downgraded
General Motors to a sell after an 88% decline to a 53 year
low.
US economic data released this week included the April S&P/Case Shiller
home price index ,which showed that home prices are down by 15.3% year
on year and no doubt had something to do with the June collapse in
consumer confidence, which came in at 50.4 versus last month’s 57.2.May
durable goods orders were flat whilst Q108 GDP was confirmed at 1%,
revised slightly higher than the original forecast. The main event of
the week was the FOMC decision on interest rates, where they “sat on
their hands,” leaving rates at 2%. The Dow fell by 4.2% over the week,
with the S&P 500 and the Nasdaq ending lower by 3% and 3.8%
respectively.
Euro-Zone M3 money supply in May registered 10.5%, still high, although
June consumer confidence for the region was lower than expected. The
main news out of the UK was Q108 GDP, which fell to 0.3%, the least in 3
years and below expectations. Falling house prices, stumbling consumer
confidence and a contraction in services, in fact the weakest services
expansion in 12 years, were blamed for the fall. The FTSE 100 index lost
1.6%, fairing better than the French CAC and the German DAX, which gave
up 2.5% and 2.4% respectively.
Out East, Japan’s consumer prices rose at the fastest pace in a decade
in May, higher by 1.5% year on year, whilst in India, the reserve bank
raised interest rates for a second time this month to 8.5%. The Nikkei
fell by 2.9% whilst the Hang Seng gave up 3%.
On the currency front, the $US index fell by 1% to 72.3, whilst Euro
gained 1.8%. German 10-year bund yields dipped by 11 bps to 4.42%,
whilst Japanese 10-year “JGB” yields sank by 14.5 bps to 1.61%. US 5 and
10 year Treasury yields fell by 4.9% and 3.6%, ending the week at 3.38%
and 3.99% respectively.
Within the Commodities Complex the crude oil price rose to yet another
all time high, at $140 a barrel, a 3.8% gain on the week. The price of
Gold meanwhile rocketed by $50 post “Fed press release,” ending the week
at $928oz, a 3% rise.
Next week will sees a shortened trading week for the US, due to the 4th
July Independence Day celebrations, but the week includes the market
sensitive latest payrolls and employment reports. The ECB meet to decide
on any interest rate change, as the latest Euro-Zone CPI, retail sales
and unemployment data is released. The latest house price data is
available from the UK, including the Bank of England’s equity withdrawal
figure for Q108.The main event for Japan will be the Q208 Tankan survey.
The Dow Jones Industrial Average, perhaps the most watched stock index
in the World, fell by 4% last week and is lower by 20% since its nominal
high on 11th October 2007, so you should expect to hear about an
“official Bear Market” soon from all and sundry. Of perhaps more
interest is that it has now breeched three important long term trend
lines, from the March 2003 low, from the 1982 low and from the 1974 low,
which ushered in the longest bull market in history.
“History never repeats exactly, but it sure do
rhyme.”
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