Week ending 12th December 2008   

The main event for the US this week, aside of the $13.4BN Government loan to GM and Chrysler to tide them over to next March was the interest rate cut announced by the FOMC from 1%pa to a target rate of between 0% to 0.25%, the lowest in the Fed’s 95 year history. November housing starts and building permits were worse than expected as was the November CPI which came in at -1.7% month on month versus the -1.3% consensus. Meanwhile November retail sales and provisional consumer confidence for December surprised on the upside. The Dow eased by 0.6%, whilst the S&P 500 and the Nasdaq were higher by 0.9% and 1.5% respectively.

Euro-Zone inflation, as measured by CPI, fell by 0.5% month on month in November, whilst the fall in the UK was at -0.1%.EU new car registrations collapsed by 25.8% in November, the largest monthly fall since 1999. As UK unemployment rose at its fastest pace since 1991, November retail sales came in at 0.3%, which was higher than economists’ expected The FTSE 100 index inched higher by 0.2%, whilst the French CAC and the German DAX fell by 12.5% and 12.4% respectively.

Out East, Japan cut its benchmark interest rate to 0.1% after the disappointing Q408 Tankan survey, whilst in Chinese economic growth continued to slow, as evidenced by the latest industrial production, export growth and real estate spending information. The Nikkei and the Hang Seng gained 4.3% and 2.5% respectively.

The $US index fell by 2.9%% to 81.12 (down by 7.5% in 4 weeks as volatility became extreme within the currency complex. The Swissie and the Euro jumped by 6.5% and 4.1%, whilst on the downside the Russian Rouble hit a record low against the Euro and has fallen by 15% against the $US this year. German 10-year bund yields fell by 29 bps to 3%, whilst Japanese 10-year “JGB” yields dipped by 16bps, ending the week at 1.23%. US Treasury 5 & 10 year yields fell by another massive 13% and 17.7% respectively, ending the week at 1.35%, and 2.13%. Over the past month yields have fallen by 35%!

Within the commodities complex the $crude oil price fell by 13.8% ( -22% over a month) ending the week, at $42.4 a barrel, despite OPEC announcing a daily cut of 2.2m barrels, its largest reduction ever. Meanwhile the price of $Gold rose by 2% to $837.4oz, ending the week at the same price that it started 2008.

Next week sees Q308 GDP data for the US and for the UK, with the former also releases November house sales and the latter December home prices. The EU releases October new orders whilst. Japan announces December CPI and November unemployment.

This will be the final “week ending” for 2008, so wish all of our readers a very merry Christmas and a healthy and happy 2009. As for it being “prosperous,” this will depend on just how you read and interpret the “tea leaves.” We will do our best to supply some clues.

“Nobody, 20 years ago, forecast the internet”

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