US PPI in August came in at 9.6%
annualised and better than expected, whilst the trade deficit
deteriorated in July to $62.2BN versus $57BN in June. Consumer credit
for July halved and August advanced retail sales fell by 0.3% against
the 0.2% forecast. Stock volatility continued on higher volume, with the
Dow gaining 1.8%, whilst the S&P 500 and the Nasdaq rose by 0.8% and
0.2% respectively.
Euro-Zone investor confidence fell in September to -20 versus the -18
expected as Q208 payrolls grew at the slowest pace since 2006. Two UK
based travel groups folded, leaving many of their customers stranded
overseas and Italy’s state carrier, Alitalia, remained in 11th hour
talks for its survival. UK PPI was 9.7% and its trade deficit widened in
July. The FTSE 100 index jumped by 3.4%, whilst the French CAC and
German DAX were higher by 3.2% and 1.8% respectively.
Out East, Japan’s economy contracted by more than expected during Q208
and the number of Japanese real estate companies filing for bankruptcy
protection surged by 23.5% in August from a year earlier as loans have
been choked off. Elsewhere, China’s retail sales in August grew at 23.2%
year on year, the fastest pace in 9 years. The Nikkei rose by a modest
0.2% and the Hang Seng fell by 2.9%.
It was a wild week for currencies, although the $US index remained
unchanged at weeks end at 78.93, whilst the British Pound gained 2.1%
and the Euro 0.7%. German 10-year bund yields jumped by 18 bps to 4.18%,
whilst Japanese 10-year “JGB” yields rose by 7 bps, ending the week at
1.53%. US Treasury yields were volatile, before ending the week higher
than they started it, with 5 year yield up by 1.3% to 2.96% and the 10
year yield higher by 1.9%, to 3.73%.
The commodities complex witnessed a continued sell off, with the crude
oil price lower by 4.7% to $101.3 a barrel and the price of Gold fell by
4.8%, ending the week at $765oz. The price of Silver, more attuned to
the fortunes of the Global economy, collapsed by 12.4% over the week.
Next weeks main economic data relates to the August CPI readings for the
US, the UK and for the wider Euro-Zone. The EU also gets to see the
latest new car registrations, whilst the UK also announces the latest
unemployment data and retail sales. All eyes, of course, will be on the
US FOMC, who meet up to decide on any US interest rate change
At the 11th hour, Lehman Brothers, once the 4th largest US investment
bank, has filed for chapter 11 bankruptcy, whilst the Bank of America
has agreed to buy Merrill Lynch for $50BN in an all paper deal. Adding
to the mix, in what looks to be an interesting week, is that the World’s
largest insure, AIG, is seeking help from the Fed.
“Bank failures are caused by depositors who
don’t deposit enough money to cover losses due
to mismanagement”
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