US economic data released this week
showed a 16 year high for initial jobless claims and October PPI fell by
a record 2.8%.October, whilst CPI saw its biggest monthly fall in 61
years. Housing starts were higher than forecast but building permits
were lower. Banking stocks were hammered, including that of Citigroup,
despite its Arabian Prince stepping up for more equity, regardless of
the 63% fall in his Kingdom Holdings Co share price. The Dow fell by
5.3%, whilst the S&P 500 and the Nasdaq were down by 8.4% and 8.7%
respectively.
The Euro-Zone powerhouse, Germany, is now in recession, as foreign
orders for German capital goods slumped by 14% in September. The
region’s CPI also fell in October. The UK’s fiscal deficit swelled to
£37BN for the first 7 months of the fiscal year and at the largest
amount since records began in 1993 and this just ahead of what looks to
be huge borrowing plans to fund tax cuts in the Countries November pre
budget announcement. The FTSE 100 index collapsed by 10.8%, beaten by
its neighbours as the French CAC and the German DAX fell by 12.5% and
12.4% respectively.
Out East, Japan’s Q308 GDP contracted by 1.6% and automakers in China
are seeking Government aid and a lower sales tax to help revive waning
demand in the World’s 2nd largest vehicle market. Elsewhere, Goldman
Sachs are suggesting a 30% decline in India property prices and rent.
The Nikkei and the Hang Seng lost 6.5% each.
The $US index rose by 11/4%% to 87.8, with the only other notable gainer
being the Japanese Yen, higher by 0.5%. German 10-year bund yields fell
by 26 bps to 3.34%, whilst Japanese 10-year “JGB” yields dipped by
10bps, ending the week at 1.39%. US Treasury 5 & 10 year yields fell by
a massive 15%, ending the week at 1.99%, and 3.17 respectively.
Within the commodities complex the $crude oil price fell by 13.3% ending
the week under the $50 mark, at $49.9 a barrel, whilst the price of
$Gold jumped by 6.6% to $799oz as the World Gold Council announced that
demand had risen by 18% during Q308.
Next week sees the latest house price data and Q308 GDP for the US and
for the UK, with the former also releases October consumer confidence
and durable goods orders statistics. The EU also releases consumer
confidence numbers, together with the latest unemployment position and
October M3 money supply. Japan releases October housing starts and
November CPI.
Due to holiday commitments, there will be no weekending next week.
The US 30 year Treasury Bond Yield spiked to an all-time low of 3.43% in
a “flight-to-safety” bid on Friday, lower by 19% in just 1 week.
Meanwhile the “Ultimate” safe haven, the 3 month T-bill yield fell to
0.015%, which is effectively zero, thereby nearly equalling the zero
yields offered up in short-term Japanese bills during their deflation.
According to Merrill Lynch, junk bonds have lost more than $187 billion
in market value since August whilst yields on US speculative-grade
corporate bonds surpassed 20% for the first time in at least two decades
as a declining economy increased the risk of default. You can almost
smell the fear.
“The only thing we have to fear is fear itself”
FDR 1933
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