Aside of one of America’s oldest
institutions, Lehman Brothers, going bust and another, Merrill Lynch,
offering itself to the Bank of America, not to mention the once largest
insure in the World, AIG, staving off bankruptcy by accepting a $85BN
taxpayer loan, economic news continued. US industrial production in
August fell by 1.1% whilst August CPI came in at 5.4% annualised and as
expected. The FOMC left interest rates on hold, at 2% as August housing
starts and building permits fell. Stock volatility was huge, with the
first few days of the week driving the major averages to new lows before
the Treasury plan created a huge rally, particularly for financial
stocks. The Dow ended the week lower by 0.3%, whilst the S&P 500 and the
Nasdaq rose by 0.3% and 0.7% respectively.
Euro-Zone “official inflation data” for August was stated at 3.8% for
the Euro-Zone and 4.7% for the UK (was that a pig I’ve just seen fly
by?).Euro-Zone new car registrations collapsed by 15.7% in August, from
-7.4% a month earlier, whilst in the UK August retail sales were higher
than expected at 3.3% despite a rise in unemployment, which for July is
officially put at 5.5%. The FTSE 100 index fell by 1.95%, despite the
largest 1 day gain in its history on Friday after the bailout news, ban
on short selling and the arranged merger between Lloyds’sTSB and the
Nation’s largest mortgage provider, HBOS.The French CAC and German DAX
eased by 0.2% and 0.7% respectively.
Out East, the Bank of Japan left its target rate at 0.5% as August
Nationwide department store sales fell by 3.1%. Tax revenues in China
fell sharply in August as stamp duty on stock trading slumped. The
Nikkei fell by 2.4% and the Hang Seng eased by 0.1%.
It was a wild week for currencies, with the $US index strengthening over
the first 4 days of the week, before ending it at 77.68, lower by
1.7%.The British Pound gained 1.7% whilst the Yen fell by 2.6%. German
10-year bund yields added 2 bps to 4.21%, whilst Japanese 10-year “JGB”
yields eased by 5 bps, ending the week at 1.48%. US Treasuries tumbled
on the “bailout plan news,” with the two year note yields rising by the
most in 26 years. The 5 year yield soared by 19.4% on Friday and ended
higher by1.3% on the week at 2.99%, whilst the 10 year yield spiked by
9.7%, ending the week higher by 1% at 3.77%.
The commodities complex also witnessed wild volatility, with the crude
oil price falling from $101 to $90 a barrel, before ending the week
higher by 1.5% at $102.8 a barrel. The price of Gold, meanwhile, soared
$100 before giving up $32, yet still ended the week higher by 13%, at
$865oz
Next week sees the latest US home sales and durable goods orders,
together with Q208 personal consumption. The UK releases August net
consumer credit and lending on dwellings, whilst Japan announces the
latest trade data and the Euro-Zone M3 money supply.
Contrary to the collective statements from US politicians that the
Treasury plans are about, "protecting the taxpayer and promoting
market stability”, it is far more about trying to save their
reputations, their terms in office and for their friends who pay for
their campaigns, whilst promising them jobs after they retire from
“public service.” According to the Centre for Responsive politics, a non
profit campaign finance watchdog, of the Nation’s 100 main political
donors since 1989 are 10 of the nation’s largest banks and investment
firms who have collectively contributed $170m. Among the companies
rescued this month, with taxpayers Dollars, are AIG, who have given
$9.7m since 1989 and Fannie & Freddie, who have donated a combined
$19.6m. In the past year securities and investment firms have given
Presidential contenders, Obama and McCain $9.9M and $6.9m respectively,
according to USA Today. .
“If we don't succeed we run the risk of failure”
by Dan Quayle, Presidential hopeful
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