Week ending 2nd January 2009   

US housing data stood out within economic releases, with sales off by 35% in November, year on year, with inventories surging to 11.2 months. The October S&P/Case Shiller release showed home prices lower by 18% over a year; with the two large coastal states of California and Florida lower by over 30%.December consumer confidence fell to 38 versus the 45.5 expected and the 44.9 seen in November. Despite the gloom, stocks enjoyed one of their best starts to the year since 2003, with the Dow higher by 6.1%, whilst the S&P 500 and the Nasdaq rose by 6.8% and 6.7% respectively.

Euro-Zone broad money supply, as measured by M3, slowed sharply to 7.8% in November versus the 8.7% seen in October, whilst UK house prices, as collated by HBOS, fell in December by the most in 12 years. Staying with the UK, Q308 house equity withdrawals fell by £5.7BN versus the -£3.3BN expected by analysts. The FTSE 100 index jumped by 8.2%, whilst the French CAC and the German DAX gained 7.5% and 7.4% respectively.

Out East, Japanese exports fell at their fastest pace on record in November, falling by 27% annualised, prompting Barclays Capital to call for a 12% annualised contraction in GDP this quarter. It looks to be a similar story for China, Singapore and Australasia. The Nikkei rose by 1.2% whilst the Hang Seng gained 6%.

The $US index rose by 1.2%% to 81.9. The South African Rand and the $OZ jumped by 4% each, whilst on the downside the Swissie and the Euro fell by 1.1% and 0.8% respectively. German 10-year bund yields added 1 basis point to 2.95%, whilst Japanese 10-year “JGB” yields dipped by 4bps, ending the week at 1.16%. US Treasury 5 & 10 year yields reversed trend this week, higher by 15.4% and 13% respectively, ending the week at 1.73%, and 2.42%.

Within the commodities complex the $crude oil price soared by 22.9%, ending the week, at $46.3 a barrel, whilst the price of $Gold rose by 0.95% to $879.5oz.

Next week sees vehicle sales data for the US and for Japan, with the former also releasing November construction spending and December employment data. It’s a buy week for the Euro-Zone, where we expect to see news on PPI, unemployment, consumer confidence and retail sales. The UK also releases PPI numbers and consumer confidence sentiment, whilst the Bank of England MPC decides on any interest rate change.

So there we have it. For the stock bulls, a great start to 2009, albeit that it was achieved on pitiful volumes and a “feel” that the invisible hand of the federal reserve/treasury has thwarted any selling that appeared. Next week will be more telling with everyone back at their screens.

“Success comes in cans, not in cant’s”

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