US economic data released this week
included a surprise increase in January retail sales, at 1% versus an
expected fall of 0.8%. No doubt this was assisted by inventory
discounting following the disappointing Xmas period. The December trade
deficit improved by less than expected at -$US39.9BN whilst the February
provisional University of Michigan consumer confidence index fell by
more than analysts forecast. The Dow fell by 5.2% over the week, with
the S&P 500 and the Nasdaq lower by 4.8% and 3.6% respectively.
Within the Euro-Zone, Q408 GDP slumped by 1.2%, the worst quarter in 13
years, whilst car sales plunged by 27% in January, the largest fall in
over two decades. UK home sales declined in the quarter ending January
2009 to the lowest level since 1978, as the economy contracts by far
more than the “experts” expected. The Lloyds banking group appears to be
heading towards full Nationalisation as its share price dropped by
another 1/3rd thanks to HBOS, the Countries largest mortgage lender to
whom Lloyds was recently pressurised to absorb, announced a “surprise”
£8.5BN loss. The FTSE 100 index lost 2.4%, whilst the French CAC and the
German DAX were down by 4% and 5% respectively.
Out East China’s exports in January fell by 17.5%, the most in 13 years
as demand within the US and Europe has collapsed. Despite a 14% fall in
January, Chinese auto sales of 735,500 overtook America for the first
time, as the US saw a 37% plunge to 656,700 units. Elsewhere, officials
in Japan are warning that the impending Q408 GDP figures are likely to
show a contraction of 10% annualised the worst performance in over 50
years. The Nikkei fell by 3.7% whilst the Hang Seng eased by 0.7%.
The $US index rose by 0.8% to 86, with notable losers being the British
Pound, lower by 2.7%. German 10-year bund yields fell by 26 bps to
3.11%, whilst Japanese 10-year “JGB” yields eased by 8 bps, ending the
week at 1.26%. US Treasury 5 & 10 year yields fell by 4.2% and 3.3%
respectively, ending the week at 1.86%, and 2.88%.
Within the commodities complex the $crude oil price gained 4.5% at $42 a
barrel, whilst the price of $Gold rose by 3%, ending the week at $942oz.
Next week is a holiday shortened week for the US, with the markets
closed there on Monday for President’s Day. Economic data to be released
includes January housing starts and the latest inflation numbers.
January CPI is also due out for the UK, together with January retail
sales, whilst the Euro-Zone trade balance for December will be
announced. For Japan, January condominium sales will be released,
together with the aforementioned Q408 GDP results.
The G7 Finance Ministers meet up in Rome this weekend, pledging to
restore confidence to financial markets and growth to the world economy.
As the Obama’s near $US1 Trillion Bill followed possible $US2 Trillion
bailout packages by the US Treasury and the Federal Reserve, it is
interesting to note comments from a former advisor to the Chinese
Central Bank, from whom further loans would have to be sought. He
announced that China would be seeking guarantees that its existing
$US700BN of US government debt will not be eroded by reckless policies.
“Those entrapped by the herd instinct are
drowned in the deluges of history”
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