It was a light week for US economic
data, which included good news on existing home sales for September,
which came in at 5.18m versus the 4.91m of August and the 4.95m
expected, due mainly to the lower prices now available. Initial jobless
claims for October, however, were higher than expected and look set to
continue. The Dow fell by 5.4%, whilst the S&P 500 and the Nasdaq were
lower by 6.8% and 9.3% respectively.
Within Europe, the ECB has loaned banks $1.02Trillion, a 68% surge from
the first week of September, whilst in the UK, Q308 GDP contracted by
0.5%, the first G7 economy to show a negative quarter. UK September
retail sales fell by 0.4%, just as UK Government borrowing has ballooned
to its highest six month level since 1946, more or less guaranteeing a
very hard landing for the UK economy, which has been presided over by
“prudence Brown” for over 10 years. The FTSE 100 index gave up 4.4% over
the week, with the French CAC and German DAX both lower, falling by 4.1%
and 10.2% respectively.
Out East, Japanese stocks plunged as Toyota Motor Corp’s car sales fell
for the first time in 7 years and Sony Corp slashed its earnings
forecast. The Hong Kong market fared even worse as Citic Pacific Ltd,
China’s largest state owned investment company, tumbled by 55%,
following $US2BN in losses from unauthorised currency bets. The Nikkei
fell by 12% over the week, whilst the Hang Seng gave up 13.3%.
The $US index jumped by 4.9% to 86.4, yet still underperformed the
Japanese Yen which rose by 7.8% to a 13 year high. Elsewhere, the
British pound fell below $1.53/£, its largest drop in 37 years and
exceeding the collapse seen in 1992 when the UK was forced out of the
EMU. German 10-year bund yields fell by 26 bps to 3.75%, whilst Japanese
10-year “JGB” yields declined by 9bps, ending the week at 1.49%. US
Treasury yields collapsed on “safe haven” buying, with the 5 year yield
lower by 8.1% on the week at 2.6%, whilst the 10 year yield fell by
6.1%, ending the week at 3.7%.
The commodities complex continued its ugly liquidation, with the $crude
oil price lower by another 11% ending the week at $64.2 a barrel, whilst
the price of $Gold ended the week at $730oz, lower by 7.3%.
Next week is a busy one for US economic data, including advance Q308
GDP, October consumer confidence and the latest S&P/Case Shiller home
price index, not to mention an FOMC meeting to decide on any change for
US interest rates. More on jobs, confidence and CPI are due out for the
Euro-Zone, whereas the UK sees the latest on house prices, courtesy of
the Nationwide and HBOS, together with the latest consumer credit
figures. Japan releases September unemployment and October CPI.
The G7 meeting has come and gone, as has Warren Buffet’s “buy signal,”
yet the markets have reverted lower. This weekend the heads of 43
European and Asian nations are meeting in Beijing and on the 15th
November 2008, the first of several planned G20 heads of state meetings
is to be held in Washington in an effort to “solve” the economic
malaise. Don’t pin your hopes to high on any successful resolutions.
“A lie told often enough becomes the truth”
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