Week ending 5th June 2009   

US economic data released this week saw better than expected job losses, at least according to the “official” May nonfarm payroll, which came in at -345,000 versus the -520,000 analysts expected, which was at odds with the rise to 9.4% unemployment in May against April’s 8.9%. April also saw an improvement in pending US home sales and in personal incomes. Meanwhile, consumer credit in April fell by $15.7BN against the -$6BN expected and the -$11BN seen in March, a negative for an economy so dependent on credit. The Dow rose by 3%, whilst the S&P 500 and the Nasdaq gained 2.3% and 4.2% respectively.

Euro-Zone unemployment in April rose to 9.2%, higher than expected and a fair jump from March’s 8.9%, whilst Q109 GDP contracted by 4.8% annualised. Retail sales for the Zone in April were higher, but remain negative year on year at -2.3%. The ECB and the Bank of England MPC left interest rates on hold, at 1% and 0.5% respectively whilst the UK announced that consumer credit in April rose by £0.3BN against the £0.1BN in March and that PPI for May was -9.4% year on year. The FTSE 100 index was higher by 0.5%, whilst the French CAC and the German DAX gained 1.9% and 2.8% respectively.

Out East, Japanese companies are cutting spending at the fastest pace in 54 years, as profits tumbled by a record 69%. Meanwhile in China, national fiscal revenue fell by 13.6% year on year to April, with corporate taxes lower by 27%. Against this, Government spending has jumped by 24.5%. The Nikkei gained 2.6%, whilst the Hang Seng rose by 2.8%.

The $US index gained 1.9% this week, to 80.7, with losers including the Yen and the Euro, which gave up 3.4% and 1.3% respectively. Sovereign debt yields climbed again this week, with the German bund yield up by 13 bps to 3.72% and the UK 10-year gilt yield, higher by 18bps, ending the week at 3.92%. The US Treasury 5 and 10 year yield jumped by 14.9% and 5.2%, ending the week at 2.85% and 3.86%.

Within the commodities complex, the $crude oil price rose by 3.2% to $68.4 a barrel, whilst the $Gold & $Silver price fell by 2.5% and 3% respectively.

Next week sees the latest trade balances for the US, the UK and for Japan and industrial production data for the Euro-Zone and the UK. May retail sales figures are due for the US, whilst Japan will update on bankruptcies for May.

US Treasury Secretary, “Tiny Tim Geither,” scurried off to China last week, in an effort to reassure the holders of some $US1.5Trillion in dollar denominated assets that their investments were safe and would hold their purchasing power. Meanwhile, during a speech at Peking University, students allegedly laughed as he re-iterated the above, whilst stating that the Chinese Government should let the Chinese currency rise against the dollar. Over the two days of the 3rd and the 5th June, the 2 year treasury yield soared by 42%.

“Creditors have better memories than debtors”

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