Week ending 3rd October 2008   

It was a grim week for US economic data, as July house prices showed a 16.35% slide, year on year, whilst September vehicle sales plunged by the most in 17 years, at 12.5 units versus 13.7 in August. The September ISM manufacturing index, at 43.5 v the 49.5 in August confirmed that the US is either in recession, or at least on the cusp of it. Finally, at weeks end, the September non-farm payrolls were announced at -159,000 against the 105K expected and the 84,000 loss in August. The Dow ended the week lower by 7.3%, whilst the S&P 500 and the Nasdaq gave up 9.4% and 10.8% respectively. (These are not typing mistakes)

The ECB left interest rates at 4.25% as August Euro-Zone PPI was stated at 8.5% annualised. Retail sales also fell by 1.8% year on year, more than forecast. UK Q208 GDP was at the weakest annual pace since 1992 and average house prices had their largest annual decline, at -12.4%, since 1991 in September, according to the Nationwide Building Society. The FTSE 100 index fell by 2% over the week, whilst the French CAC and German DAX gave up 2% and 4.4% respectively.

Out East, Japan’s unemployment rate in August rose to 4.2% from July’s 4% as the countries industrial production fell at the fastest pace in 5 years. Elsewhere, China’s manufacturing activity contracted for a second month. The Nikkei fell by 8% and the Hang Seng gave up 5.4%.

The $US index surged by 4.5% to 80.5, with the Euro hammered by 5.7%. German 10-year bund yields fell by 24 bps to 3.92%, whilst Japanese 10-year “JGB” yields were little changed, ending the week at 1.45%. US Treasury yields had a very volatile week, gyrating to the tune of the bailout plan, with the 5 year yield higher by 11% on the week at 3.68%, whilst the 10 year yield was higher by 4.8%, ending the at 3.64%.

The commodities complex also witnessed continued volatility, with the crude oil price collapsing by 12.2% to $93.9 a barrel, with the price of Gold also lower by 6.2%, ending the week at $833oz

Next week sees trade data for the US and the UK, with the former also releasing August consumer credit numbers and pending home sales. The Bank of England MPC review interest rates as the latest consumer confidence numbers are announced, whilst the Euro-Zone Q208 GDP forecast is available. Out East, Japan announces September bankruptcies and August machine orders.

Three weeks ago most politicians in congress, or in any other part of the World come to that, had no more awareness of the problems we are facing than the man on the street. How much confidence do you have that the very people who caused the problem are suddenly going to become smart enough to fix it? In fact, they are likely to make it worse.

“You get who you vote for”

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