Market Overview

Weekly Market Overview

Week ending 17th April 2009

Fresh from a month travelling around the wonderful land of OZ, confirms two facts of many seen. One is that Politicians rarely show any true ideas, they just copy what’s happened elsewhere and two is that the Australian economy is about a year behind the West, with their debt problems catching up fast. In respect of the first observation, as Obama unveiled his latest “stimulus package,” this time “to move swiftly to a high speed train network,” with an initial allocation of $14BN, OZ Premier Rudd, fresh after dolling out $A900 to the majority of “diggers,” unveiled a $43BN plan to install an internet broadband scheme 100 times faster than anyone else currently has, albeit that it will take 10 years to complete. The fact that broadband penetration in OZ, at 17% and far lower than most 1st world economies, not to mention the affordability of it and just whether anyone wants it, seems to have slipped by him.

Indices - Year to Date (17th April 2009)

The US officially entered deflation this week, for the first time since 1955, as March CPI fell by 0.4% year on year, whilst PPI for March actually fell by 3.5% annualised. Despite official views that the economy is seeing signs of “bottoming,” advance retail sales for March, remembering that consumption still represents 2/3rds of the economy, fell by a worse than expected 1.1%. The Dow gained 0.6% over the week, with the S&P 500 and the Nasdaq higher by 1.5% and 1.2% respectively.

According to the Pension Protection Fund, the insurance scheme for the under funded pension plans of insolvent employers, the aggregate deficit of corporate UK pension funds soared past Ł250bn ($373bn) in March, setting a record for a shortfall. For the wider European area, exports to its main trading partners dropped by the most in at least nine years in January, with those to the US plunging by 27% year on year. New car registrations for the EU 25 countries fell by 9% in March, whilst Industrial production in Europe contracted by the most on record in February as the deepening global recession curtailed demand for manufactured goods around the world. The FTSE 100 index gained 2.7%, whilst the French CAC and the German DAX were higher by 4% and 4.1% respectively.

Out East, China’s economy slowed to 6.1% in Q109 from the prior quarter’s 6.8%, the slowest pace in almost 10 years. Meanwhile, March Condo sales in Tokyo collapsed by 46% on a year earlier. The Nikkei fell by 0.6%, whilst the Hang Seng rose by 4.7%.

The $US index ended higher by 0.2% to 85.98 with the South African Rand up by 1.4% and the Yen by 1.1%, whilst on the downside the Kiwi dollar gave up 1.7%. German bund yields added 2 bps to 3.27%.., whilst Japanese 10-year “JGB” yields were little changed, ending the week at 1.44%. The US Treasury 5 year yield was lower by 0.4%, ending it at 1.88%, whilst the 10 year gained 0.1% to 2.93%.

Within the commodities complex the $crude oil price fell by 3.7% to $50.3 a barrel, whilst the price of $Gold fell by 1.5%, ending the week at $869oz.

Next week sees home sales data out for the US, together with the March durable goods orders update and April consumer confidence, whilst the UK announce CPI for March and unemployment for February, plus advance Q109 GDP guestimates. Japan and the Euro-Zone update on trade, with the latter also releasing the latest ZEW economic confidence survey.

Returning to the OZ visit, other notables aside of the disbelief ventured by a well respected gold fund manager on our shorter term price expectations, and the “surprise” expressed by just about any financial commentator on the jump in unemployment and fall in property values, was on the valuations being accorded to “Superannuation Funds.” “Supers,” to which a compulsory 9% of income is made, have suffered an average 22% loss during 2008 and although there is nothing surprising in that, it is the way in which unlisted securities, particularly property, which should cause concern. Many supers have as much as 25% - 50% invested into unlisted assets and whilst the local listed property index plunged by 57% last year, the net asset value of unlisted property funds “rose” by 0.1%. There is something very odd here.

“Government does not solve problems; it subsidizes them.”

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Table of Indices

Exchng Apr-17 Week Chg Week % Mnth Chg Mnth % Year Chg Year % 2K Chng* 2000 % ------ -------- -------- ------ -------- ------ -------- ------ -------- ------ TSX 9437.65 250.53 2.7% 717.26 8.2% 449.95 5.0% 1023.90 12.2% IPC 22234.84 1704.21 8.3% 2608.09 13.3% -145.48 -0.7% 15104.96 211.9% BVSP 45778.28 239.57 0.5% 4852.41 11.9% 8227.97 21.9% 28686.28 167.8% FTSE 4092.80 109.09 2.7% 166.70 4.2% -341.37 -7.7% -2837.40 -40.9% CAC-40 3091.96 117.78 4.0% 284.62 10.1% -126.01 -3.9% -2866.36 -48.1% DAX 4676.84 185.72 4.1% 592.08 14.5% -133.36 -2.8% -2281.30 -32.8% MIB-30 19126.00 992.00 5.5% 2318.00 13.8% -938.00 -4.7%-23865.00 -55.5% Swiss 5192.37 121.77 2.4% 320.04 6.6% -342.16 -6.2% -2377.73 -31.4% Nikkei 8907.58 -56.53 -0.6% 798.05 9.8% 48.02 0.5%-10026.76 -53.0% HngSng15601.27 699.86 4.7% 2025.25 14.9% 1213.79 8.4% -1360.83 -8.0% AllOrd 3728.10 110.60 3.1% 195.80 5.5% 68.80 1.9% 575.60 18.3%

* Change since 31/12/1999 
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Color Codes: Blue = Record close; Red = Big loser; Green = Big winner; Aqua = Record close with big gain

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