US CPI jumped to 5.6% in June, the
highest year on year rate since 1991, whilst July import prices were
higher by 21% year on year. July advance retail sales came in at -0.1%.
The trade deficit narrowed in June to -$56.8BN versus -$59.8BN in May,
whilst New York tax revenues are falling hard, as Wall St firms turn
from profits to losses. The Dow fell by 0.6%, whilst the S&P 500 and the
Nasdaq were higher by 0.2% and 1.6%.
Euro-Zone CPI remained static in July, from a month earlier at 4.4% but
rose in the UK to 4.4%, a larger than expected increase versus the 3.8%
recorded in June. Economic growth in the Zone contracted by 0.2% in
Q208, the first contraction since the launch of the Euro, almost a
decade ago. The UK’s trade balance in June was also worse than analysts
predicted and the “official” unemployment rate in June rose to 5.4%, the
largest rise in 16 years. The FTSE 100 index followed the Dow, falling
by 0.6%, whilst the French CAC and German DAX fell by 0.9% and 1.8%
respectively.
Out East, wholesale prices in India are rising at 12.4%, whilst Japan is
forecast to be close to its first recession since 2003 as it endured a
contraction in GDP of 2.4% annualised in Q208, far worse than
expectations and far lower than the 4% achieved in Q108.The Nikkei fell
by 1.1% whilst the Hang Seng ended lower by 3.3%.
The $US index jumped by a further 1.8% to 77.15, whilst the Euro and
British Pound fell by 1.5% and 2.4% respectively. German 10-year bund
yields sank by 11 bps to 4.15%, whilst Japanese 10-year “JGB” yields
were lower by 1.5 bps, ending the week at 1.455%. US Treasury yields
eased, with 5 year yield lower by 3.4% to 3.1% and the 10 year yield
down by 2.5%, ending the week at 3.85%.
Within the Commodities Complex, platinum miner, Lonmin, soared by 50%
after it was approached by fellow miner Xstrata, who offered £33 a share
to acquire Lonmin. This bid activity did not halt the recent correction
in commodity prices, however, as the crude oil price fell by 1% to
$113.9 a barrel whilst the price of Gold gave fell by 8.4%, ending the
week at $792oz.
Next week sees the latest housing starts in the US and July PPI, whilst
the UK releases Government debt, money supply and retail sales for
July.Q208 GDP numbers are also announced for the UK, whilst the latest
trade balance will be given for the Euro-Zone and for Japan.
The $Gold price had its largest percentage fall this week since February
1983, falling by 8.4%. Back then this coincided with the early stages of
a 20 year stock market boom, supported by the largest credit expansion
in history. Many stock “bulls” are reading the past month’s rally, in
stocks, as the start of another protracted upswing, boosted by gold’s
recent decline, but they should observe very closely the state of
“credit markets,” now versus then, before getting too excited.
“Even to win the lottery, you first need to buy
a ticket.”
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