The US economic data released this
week included the February S&P/Case Shiller home price index, which
showed that average home prices fell by 18.9% over the year. Phoenix,
Arizona, became the first major city where home prices have halved since
the market peaked, falling by 50.8%.US GDP is estimated to have
contracted by 6.1% in Q109, versus the -4.7% expected but April consumer
confidence surprised on the upside. The Dow and the S&P 500 gained 1.7%
and 1.3% respectively, whilst the Nasdaq ended higher by 1.5%.
Official unemployment in the Euro-Zone in March was put at 8.9%,
slightly worse than expected, whilst April CPI for the region was
estimated at 0.6%, despite the increasing evidence of deflation creeping
into Germany, France, Spain and Ireland. Average UK house prices fell by
0.4% in April, according to the Nationwide, despite March forecast M4
money supply running at 17.8% annualised. The FTSE 100 index gained 2%,
whilst the French CAC added 1.8% and the German DAX 2%.
Out East, OZ PM, Kevin Rudd, announced the Country’s single biggest
collapse in tax revenue since post WW2 as his Government continues to
expand its deficit spending, whilst the electorate drastically curtail
their expenditure and borrowing. Elsewhere, Japan remains in deflation,
as evidenced by the April CPI number of -0.3%, whilst its April vehicle
sales fell by 28%. The Nikkei rose by 3.1% and the Hang Seng gained
1.7%.
The $US index eased by 0.2% to 84.6 with the Yen lower by 2.2%. On the
upside were the Canadian Loony, higher by 2% and the £GBP, higher by
1.6%, German bund yields eased by 2 bps to 3.17%, whilst Japanese
10-year “JGB” yields were down by 3bps, ending the week at 1.40%. The US
Treasury 5 and 10 year yield were higher this week by 4.7% and 5.9%,
ending it at 2.03% and 3.17% respectively. The 10 year yield has jumped
by 20% over the past month
Within the commodities complex the $crude oil price rose by 3.2% to
$53.2 a barrel, whilst the price of $Gold fell by 2.9%, ending the week
at $886oz.
Next week sees interest rate decisions for the UK, Europe and Japan,
with more on inflation for the UK and the Euro-Zone. The US has a stream
of April employment data due for release, together with March pending
home sales.
President Obama concluded his first “100 days” in office this week, a
period that’s seen perhaps the most power and political intervention in
the US economy since FDR and the “new deal” of 1933. Obama is in full
support of the Fed and his Treasury Secretary’s attempt to “borrow their
way out of recession,” but back in 1933 the population of the US was
126m and the federal deficit was $22.5BN, whereas it’s now 304m and
$11,250BN respectively, not to mention the unfunded liabilities of
somewhere over $60 Trillion.
“Discombobulated
- having self-possession upset; thrown
into confusion.”
