It was a light week for US economic
data released this week, which aside of improved pending home sales in
March, was focused on employment. The April non-farm payroll count
improved on the March number, albeit that it was mainly due to higher
government hiring ahead of a national census. Unfortunately, however,
“official” unemployment for April rose to 8.9%. The Dow and the S&P 500
jumped by 4.4% and 5.9% respectively, whilst the Nasdaq ended higher by
1.1%.
Euro-Zone PPI fell in March by 3.1% annualised, retail sales for the
same month fell by 4.2% year on year. The ECB cut interest rates by ¼%
to 1%, whilst their counterpart in the UK left rates on hold at 0.5%.The
UK saw PPI fall by 5% in April and new car registrations collapse by a
further 24%, after the prior month’s -30%. The FTSE 100 index gained
5.2%, whilst the French CAC added 4.8% and the German DAX 3%.
Out East, China’s manufacturing expanded in April for the first time in
nine months, as the government stimulus package worked its way through
and vehicle sales rose by 37%, the most in 3 years. The Nikkei jumped by
5%, in a two day holiday shortened trading week, whilst the Hang Seng
soared by 12%.
The $US index fell by 2.5% to 82.5. On the upside were the $NZ and $OZ,
which jumped by 6% and 5.2% respectively. Sovereign debt yields surged
this week, including German bund yields, which rose by 28 bps to 3.45%
and the Japanese 10-year “JGB” yield, which were higher by 5bps, ending
the week at 1.45%. The US Treasury 5 and 10 year yield were higher this
week by 5.6% and 3.75%, ending it at 2.15% and 3.29% respectively
Within the commodities complex the $crude oil price jumped by 12.25% to
$59.7 a barrel, bringing the year to date gain to 31%. Meanwhile the
$Gold price enjoyed a better week, rising by 3.4% at $916oz.
Next week sees the release of the latest trade figures and retail sales
for the US, Japan and for the UK, together with unemployment numbers for
the latter. April inflation data is also due out for the US and the
Euro-Zone. We will new car sales for the EU and April bankruptcies for
Japan.
Returning to the US banking industry, the chairman of the Federal
Reserve Board, Ben Bernanke, said, “The results released today should
provide considerable comfort to investors and the public”, referring to
the governments stress tests, suggesting that any “problem banks” should
be able to earn their way out of any troubles. Meanwhile, US regulators
shut down the 33rd bank this year and wasn’t it Bananke and the rest who
assured us all that the sub-prime mortgage situation was not a problem
and that it would be contained.
“Is
it the beginning of the end of the banking
crisis, or merely the end of the beginning?”
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