In a holiday shortened week, US
economic data released included the June Challenger job cuts report,
which rose to 46.7% from the prior month’s 45.6%. US payrolls fell by
62,000 in June, about the same as May, but the official unemployment
rate remained at 5.5%, according to the Labor department. Domestic car
sales for June were far lower than expected and the worst for the sector
in 17 years. The Dow fell by 0.5% over the week, with the S&P 500 and
the Nasdaq ending lower by 1.2% and 3% respectively.
Euro-Zone producer prices jumped to a record 7.1% annualised in May,
adding to concerns of even higher inflation down the road, hence the ECB
finally gave in to its “Vigilance” raising interest rates by ¼% to
4.25%. UK consumer credit jumped by 40% in May versus April, whilst
lending on dwellings fell by 35%, confirming the moribund state of the
housing market. This was further confirmed by the Nationwide average
house price index for June, which fell by 0.9%, 6.3% year on year,
whilst the Bank of England mortgage equity withdrawal report showed a
30% fall in Q108. The FTSE 100 index lost 2.1%, with the French CAC and
German DAX lower by 3% and 2.3% respectively.
Out East, Japan’s Q208 Tankan survey disappointed and May housing starts
declined by 6.5%.Hot money continued to pour into China during Q108,
according to an FT article, with inflows far outstripping trade and
direct foreign investment, whilst in Hong Kong, lending rose by 24% in
May to the highest in 9 years. The Nikkei fell by 2.3% whilst the Hang
Seng gave up 2.8%.
On the currency front, the $US index rose by 0.5% to 72.7, whilst the
Euro and the Japanese Yen fell by 0.5%. German 10-year bund yields
dipped by 3 bps to 4.49, whilst Japanese 10-year “JGB” yields added 2
bps to 1.63%. US 5 and 10 year Treasury yields fell by 3.1% and 0.4%,
ending the week at 3.3% and 3.97% respectively.
Within the Commodities Complex the crude oil price rose by 3.6% to $145
a barrel, as the number of call options bought (bets on a $200 price)
almost doubled over the past month. The price of Gold meanwhile gained
0.5%, ending the week at $933oz.
Next week sees the latest pending home sales, consumer confidence and
credit for the US, whilst the UK central bank decides on any interest
rate change. The UK also releases consumer confidence and trade data,
and we see a Q108 forecast of GDP for the Euro-Zone.
Leaders of the G8 gather on the island of Hokkaido in Japan on Monday,
for their annual 3 day discussions on Global issues. Issues a plenty
there certainly are to occupy their collective minds, including the
Global credit crunch, spiralling food and commodity prices and the
threat of increasing trade tensions. With the G8 members accounting for
just 58% of the World economy, calls are mounting for it to expand to
perhaps a G13, which would include China, India, Mexico, Brazil and
South Africa.
“Government is not the generator of economic
growth, working people are”
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