In a holiday shortened US trading
week, the 1st Centennial Bank of California was seized by the Federal
Deposit Insurance Corp, to become the 3rd US bank failure this year and
the 28th since the beginning of the credit crisis. Economic data was
sparse this week, but it did include confirmation that US housing starts
in December declined at a 16% annual rate to the lowest since records
started in 1959. The Dow fell by 2.5%, whilst the S&P 500 and the Nasdaq
gave up 2.1% and 3.4% respectively.
The Euro-Zone saw industrial new orders collapse by 26.2% in November
versus the -20% expected and October’s reading of -15%, whilst the
January Zew economic survey was better than analysts’ expected, at
-31.Meanwhile it was a grim week for the UK as it was confirmed that its
economy contracted by 1.5% in Q408, the worse performance since 1980.
Prime Minister Brown, who is shaping up to become the Counties worst PM
in history (and likely its worst Chancellor in history also), announced
a further staggering £100BN of tax payers money at risk to the Nation’s
banks, whilst Britain’s budget deficit in December came in at £14.9BN,
the second highest for any month since records began and now looks to be
heading for 10% of GDP. The FTSE 100 index fell by 2.3%, whilst the
French CAC and the German DAX were lower by 5.6% and 4.3% respectively.
Out East, Japanese industrial production fell by 16.6% year on year in
November, and nationwide department store sales, for December, fell by
10.4% versus the -7.2% seen in November. China’s Q408 GDP grew at 6.8%,
the slowest pace in 7 years and South Korea’s economy shrank at a larger
than expected 5.6% in the same quarter. The Nikkei gave up 5.9% whilst
the Hang Seng fell by 5.1%.
The $US index gained 1.8%% to 85.5, with the other notable gainer being
the Japanese Yen, higher by 2.1%.On the downside were the British Pound,
which fell by 6.3% and the Swiss Franc, lower by 3.2%. German 10-year
bund yields jumped by 31 bps to 3.24%, whilst Japanese 10-year “JGB”
yields were higher by 1.5bps, ending the week at 1.23%. US Treasury 5 &
10 year yields surged by 12.5% and 13.8% respectively, ending the week
at 1.63%, and 2.62%. Since its 18th December low, the yield on the 30
year US Treasury has rocketed by 30%, its worst performance since 1982.
Within the commodities complex the $crude oil price jumped by 9.2%,
ending the week, at $46 a barrel, with the price of $Gold higher by
6.9%, ending the week at $898oz, after briefly touching the $900 level
for the first time since last October.
Next week sees a shortened trading week for many Asian markets, due to
the Chinese New Year celebration of “The year of the OX.” Q408 GDP data
is released for the US and there are the latest house prices, house
sales and consumer confidence numbers due out for the US also. House
price data for the UK will be released, as will the latest consumer
credit and lending on dwellings figures. For the Euro-Zone, we get to
see the latest M3 money supply numbers, unemployment and CPI estimates.
The FOMC hold their first meeting of 2009 over the 27th/28th January and
for the first time ever they do not have an official interest rate to
lower, as the last meeting announced an effective rate of 0.25% to
0%.With the policy tool of lower interest rates now exhausted and bond
yields now spiking higher, one wonders just what will they come up with
now?
“Great liars are also great magicians”
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