The US economic data released this
week included March durable goods orders, which slid once again, but by
less than forecast. For March home sales, new ones beat expectations
whilst existing home sales disappointed, which is slightly surprising,
giving that a record 803,489 US properties received a foreclosure notice
in Q109, a 24% increase year on year according to Realitytrac. After 6
weeks of straight gains for the major stock indices, volatility set in
as the earnings season got into full swing. The Dow and the S&P 500 fell
by -0.7% and -0.4% respectively, whilst the Nasdaq ended higher by 1.3%.
The Euro-Zone Government debt to GDP rose to 69.35 by the end of 2008
versus the 66% one year earlier and the April ZEW economic sentiment
survey jumped to 11.8 versus March’s -65. Not so good for Spain,
however, was the fact that Q109 unemployment rose to 17.4%, about twice
the EU average. The UK followed the US into official deflation, as March
RPI fell 0.4% year on year, whilst February unemployment rose to 6.75%
from 6.5% a month earlier. The UK economy shrank by 4.1% annualised in
Q109, the largest contraction since Maggie Thatcher came into power in
1979. Compounding the Countries dire problems, “Darling Chancellor,” in
his second budget, announced the largest budget deficit in all of the
G20 Nations, at 12.55 of GDP, with an intention to raise an additional
£269BN over the next 5 years. The FTSE 100 index gained 1.5%, whilst the
French CAC added 0.4% and the German DAX remained level.
Out East, India’s Reserve bank cut interest rates by ¼% to 3.25%, the
6th reduction in as many months, whilst in the year to March 2009, Japan
suffered its first trade deficit in nearly 30 years. Meanwhile, China’s
trade surplus is set to swell to a record $325BN this year. The Nikkei
and the Hang Seng fell by 2.2%.
The $US index fell by 1.5% to 84.7 with other losers including the
£Pound, lower by 0.8%, whilst gainers included the Yen and the euro,
higher by 2.1%, and 1.5%. German bund yields eased by 8 bps to 3.19%,
whilst Japanese 10-year “JGB” yields were down by 2bps, ending the week
at 1.42%. The US Treasury 5 and 10 year yield were higher this week by
3.3% and 2.25%, ending it at 1.94% and 3% respectively, no doubt due to
a growing discomfort with the ever expanding fiscal deficit.
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 the latest home prices and consumer confidence updates
for the US and the UK, whilst the Euro-Zone releases news on CPI and
unemployment. March housing starts and retail sales statistics is due
out from Japan. All eyes will be focussed on the FOMC meeting, albeit
with interest rates already officially at zero, one wonders what more
they can do?
“Darling Chancellor,” presented the UK’s 2009 budget this week, laced
with reminders that the Country’s difficulties were nothing to do with
their incompetence but due to Global problems. He went on to confirm
that they would “invest and grow their way out of recession,” which,
like their G7 counterparts, actually means borrowing even more money and
that this would be a “substantial help to people and businesses,” by
guaranteeing huge tax increases to pay for these increased debt levels,
which now places the UK at 12.5% of GDP, the largest of the G20 Nations.
No Nation has ever advanced its real economy by means of monetary
inflation, the artificial holding down of market interest rates or by
increasing its deficit spending as all deficit spending is deferred
taxation.
“Creditors have better memories than debtors.”
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