US economic data released this week
followed the trend of 2008, grim. November pending home sales fell by 4%
versus the -1% forecast, but it was the latest employment numbers that
were the real shocker, as employers slashed 524,000 jobs in December,
making 2008 the worst year for job losses since 1945. The “official” US
unemployment rate in December jumped to 7.2% from November’s 6.7%, a 16
year high. The Dow fell by 4.8%, whilst the S&P 500 and the Nasdaq gave
up 4.6% and 3.7% respectively.
Euro-Zone PPI in December fell by 2% month on month and by 3.3% year on
year. Estimates had been for 4.4% y on y and were substantially lower
than the prior 6.3% number. As stated above, the UK’s Bank of England
slashed interest rates to 1.5% as consumer confidence for December fell
to 47 from November’s 50, whilst December PPI fell by 25, bringing the
annualised figure to 4.3%. The FTSE 100 index ended lower by 2.5%,
whilst the French CAC and the German DAX fell by 1.5% and 3.8%
respectively.
Out East, Japanese December vehicle sales fell by 22.3% and Taiwan’s
exports slumped by a record 41.9% in December. The main story of the
week, however, was that of India’s 4th largest software company, Satyam
computer services limited, whose name means truth in Hindu, who
announced that the Chairman had been cooking the books for years. In a
further irony, as recently as last September the London based World
Council for Corporate Governance gave Satyam its Golden Peacock Award.
The Nikkei eased by 0.3% whilst the Hang Seng fell by 4.4%.
The $US index rose by 1%% to 82.71. Other gainers were the £Sterling,
higher by 4.2% and the $Canadian, up by 1.7%, whilst on the downside
were the Swissie and the Euro, which both fell by 3%. German 10-year
bund yields added 6 bps to 3.02%, whilst Japanese 10-year “JGB” yields
jumped by 14bps, ending the week at 1.28%. US Treasury 5 & 10 year
yields ended lower this week, by 11% and 0.4% respectively, ending the
week at 1.53%, and 2.4%.
Within the commodities complex the $crude oil price sank by 12%, ending
the week, at $40.83 a barrel, despite the ongoing gas supply crisis
between Russia and the Ukraine (and to Europe via Ukrainian pipelines.)
The price of $Gold fell by 2.4% to $854oz. in what was a volatile week
for the metal.
Next week sees the latest trade numbers data for the US, Japan, the UK
and for the wider Euro-Zone.CPI data is also due out for the US and the
EU with the ECB meeting to decide on any interest rate policy.
John Maynard Keynes claim to fame was an economic “theory” that whilst
consuming less than one produced may seem a good idea on an individual
basis, it is bad for the economy “as a whole,” as it lowers demand and
therefore economic growth. He turned economics on its head by stating
that savings and investment was not the engine for real economic growth,
it was by borrowing and spending, led by governments and emulated by
business and the individual. It is no wonder that his “theory” was
embraced by both government and central banks and should also be of no
surprise that the World is now in deep excreta.
“Governments view of the economy could be summed
up in a few short phrases: if it moves tax it.
If it keeps moving, regulate it and if it stops
moving, subsidise it”
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