US economic data released this week
saw better than expected durable goods orders for April and May consumer
confidence. Existing home sales for April were also higher than analysts
expected, whilst new ones disappointed. On the downside, Q109 personal
consumption fell, whilst Q109 mortgage delinquencies rose. The S&P/Case
Shiller home price index showed prices falling by 18.7% annualised in
March versus the prior month of -18.3%. The Dow rose by 2.7%, whilst the
S&P 500 and the Nasdaq gained 3.6% and 4.95%.
Euro-Zone inflation, as measured by the CPI, recorded zero in May and
consumer confidence for the same month fell by more than expected. It
was better news for UK housing, as the nationwide data showed a 1.2%
rise in May for the average home price, although consumer confidence in
May also fell by more than analyst forecasts. The FTSE 100 index was
higher by 1.2%, whilst the French CAC and the German DAX gained 1.5% and
0.5% respectively.
Out East, Japan’s industrial output surged by the most in 56 years in
April, albeit that even after a 5.2% rise it remains at the same level
as 1980. Elsewhere, Malaysia’s economy contracted by 6.2% in Q109, its
first fall since 2001. The Nikkei gained 3.2%, whilst the Hang Seng
jumped by 6.5% and by 25% in a month.
The $US index was fell by 0.9% this week, to 79.3 and below the
psychologically important 80 level .Other losers included the Yen, which
gave up 0.5%, whilst the gainers included and the Euro and the Pound,
higher by 1% and 1.6% respectively. Sovereign debt yields climbed again
this week, with the German bund yield up by 4 bps to 3.59% and the UK
10-year gilt yield, higher by 3bps, ending the week at 3.75%. The US
Treasury 5 and 10 year yield rose by 6.5% and 0.5%, ending the week at
2.35% and 3.47% respectively. Year to date the 5 year yield has jumped
by 51% and the 10 year by 54%.
It was another good week for the commodities complex, with the $crude
oil price jumping by 7.5% to $66.3 a barrel, whilst the $Gold & $Silver
price rose by 2.3% and 7.2% respectively. Over the past month Oil and
Silver have soared by 30% and 23% each, whilst $Gold is at a 3 month
high.
Next week sees the latest consumer credit numbers for the US and the UK
and unemployment data for the US and for the EU. The Euro-Zone also
releases provisional Q109 GDP figures, April PPI data and retail sales.
The Bank of England MPC are expected to leave UK interest rates on hold,
at 0.5%, whilst vehicles sale figures are due out for both Japan and for
the US.
Returning to the subject of vehicle sales, the fate of American icon,
General Motors, looks to be completed this weekend, as the company’s
bondholders look set to accept the dilution terms extracted in exchange
for GM following Chrysler into chapter 11 bankruptcy. GM stock has been
a constituent of the Dow Jones industrial Average for nearly 84 years,
second only the General Electric, but it is likely to be removed from it
as early as next week, assuming that the bankruptcy takes place.
“The
essence of government is power, and power,
lodged as it must be in human hands, will ever
be liable to abuse.”
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