US economic data released this week
included the trade deficit for April, which widened for a second month,
at $29.2BN versus $27.6BN in March, as exports fell. Advance retail
sales for May came in as expected, at 0.5% and were better if autos were
stripped out, whilst the latest University of Michigan consumer
confidence index was stated at 69 against 68.7 in May. The Dow rose by
0.4%, whilst the S&P 500 and the Nasdaq gained 0.65% and 0.51%
respectively.
Euro-Zone industrial production in April fell by a more than expected
1.9%, the worst on record and has contracted by 21.6% annualised. The UK
trade balance deteriated in April whilst industrial production for the
same month rose slightly, although it remains at -12.3% year on year,
despite improved manufacturing. The FTSE 100 index was even over the
week, whilst the French CAC and the German DAX were lower 0.4% and 0.2%
respectively.
Out East, Japanese Q109 GDP was forecast to be 3.8% against -4% in the
prior quarter and bankruptcies for May fell by 6.7%. Meanwhile, China’s
stimulus package has spurred domestic demand for autos, with car buyers
facing a two month waiting list, whilst property sales which have risen
by 45% in the first 5 months of 2009. This is just as well as Chinese
exports fell by a record annualised 26.4% in May. The Nikkei gained
3.8%, whilst the Hang Seng rose by 1.1%.
The $US index declined by 0.6% this week, to 80.2, with gainers
including the Pound and the $NZ, which rose by 2.9% and 2.6%
respectively. Sovereign debt yields varied this week, with the
German bund yield lower by 9 bps to 3.63% and the UK 10-year gilt yield,
higher by 5bps, ending the week at 3.97%. The US Treasury 5 and 10 year
yield eased by 2.4% and 1.9%, ending the week at 2.79% and 3.79%. 10 and
30 year yields have soared by 70% year to date.
Within the commodities complex, the $crude oil price rose by a further
6.3% to $72.8 a barrel, whilst the $Gold price fell by 1.6%, ending the
week at $939oz.
Next week sees the latest inflation data, as measured by CPI for the US,
the UK and the Euro-Zone, with the latter also due to announce the April
trade balance. The UK also releases May retail sales and the latest
Government borrowing figures, whilst Japan provides condominium and
department store sales for May.
The G8 Finance Ministers meet in Italy this weekend to prepare an agenda
for their leaders on July 8-10th. Their discussions will include how to
reverse the $2 Trillion of stimulus programs and on how to wind back the
projected massive budget deficits. Don’t be fooled though as Finance
Ministers, like their Central Bank colleagues have never been proactive
in their lives, it is the markets’ increase in bond yields which is
focussing their collective minds to reverse track.
“However beautiful the strategy, you should
occasionally look at the results.”
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