US economic data released this week
included May home sales, which came in lower than forecast and May
durable goods orders, which at 1.8% were above the consensus
expectations of -0.9%. Q109 forecast GDP came in at -5.5% versus the
prior quarter -5.7% and the FOMC meeting left interest rates at 0.25%,
as expected. The Dow fell by 1.2% and the S&P 500 by 0.25%.The Nasdaq
diverged by rising 0.6%.
The European Central Bank said it will lend banks 442 billion Euros
($621 billion) for 12 months, the most it has ever allotted in an
auction, as it steps up efforts to unblock credit markets in the euro
region. Meanwhile, an IMF report suggests that Irish banks face losses
of Euro 35BN, far larger than the amount predicted by Irish securities
firms. Another survey, this time by HSBC, states that up to half of UK
based foreign professionals are considering moving elsewhere due to
rising living costs and the deepening recession. The FTSE 100 index fell
by 2.4% over the week, whilst the French CAC and the German DAX were
lower by 2.9% and 1.3% respectively.
Out East, India’s Government saw net tax receipts fall by 32% in April,
the first month of the current financial year, whilst in Japan, consumer
prices fell by a record 1.1% in May, underlying the return of the
deflation which has dogged the country since the early ‘90s. The Nikkei
rose by 0.9%, whilst the Hang Seng gained 3.8%.
The $US index eased by 0.6% this week, to 79.8, with other losers
including the $Canadian and the South Korean Won, which fell by 1.6% and
1.2% respectively. Sovereign debt yields fell this week, with the
German bund yield lower by 11 bps to 3.39% and the UK 10-year gilt
yield, down by 12 bps, ending the week at 3.68%. The US Treasury 5 yield
fell by a sizeable 9.7% to 2.53% whilst the 10 year yield was lower by
7.5%, ending the week at 3.5%.
Within the commodities complex, the $crude oil price fell by 0.6% to
$69.8 a barrel, whilst the $Gold price gained 0.6%, ending the week at
$940oz.
Next week is a holiday shortened week for the US, but it will include
the latest house price survey, June consumer confidence numbers and
employment date for June. It is a busy week for the Euro-Zone, where
consumer confidence, PPI, retail sales and unemployment data is due for
release. The ECB and the Bank of England’s MPC announce any change on
interest rate policy, whilst the latest Nationwide UK house index and
consumer credit information will be announced. Out East, Japan’s Q209
Tankan survey and June CPI is due for release.
The BRIC countries (Brazil, Russia, India, and China) have 15 percent of
the world economy and 40 percent of the world's currency reserves, and
about half of the world's population. They are becoming more vocal about
the folly of exchanging actual and valuable economic goods in return for
US Treasury and Fed emitted IOUs, better known as US Treasury debt paper
and US Dollars. China and Russia in particular are calling for a
"multi-polar" world reserve currency, which is delinked from sovereign
nations. Furthermore, China and Brazil have already set up large barter
trades between each other where goods are exchanged without the use of
money at all. We live in interesting times indeed.
“ Trust is like a vase, once it’s broken, it may
be able to be fixed, it will never be the same.”
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