During a holiday shortened week for
the US, economic data released included the S&P/Case Shiller home price
index for April, which showed a 18.12% fall, year on year, for the
average home price from the 20 largest American Cities, slightly better
than expected. June consumer confidence came in at 49.3 versus the 55.3
expected and May’s 54.8, whilst the “official” unemployment rate for
June rose to 9.5%. The Dow fell by 1.9% whilst the S&P 500 and the
Nasdaq slipped by 2.5% and 2.3% respectively.
The European Central Bank left interest rates on hold, at 1% as May
unemployment rose to 9.5% from 9.3% in April. Euro-Zone retail sales
fell by 3.3% in May, year on year, whilst PPI for the same month fell by
5.8% annualised. For the UK, the Nationwide average house price index
for June rose by 0.9%, despite a large drop off in net lending secured
on dwellings in May. Q109 forecast GDP was announced at -2.4%, or -4.9%
annualised, the worst since records began. The FTSE 100 index fell by
0.1% over the week, whilst the French CAC and the German DAX were lower
by 0.3% and 1.4% respectively.
Out East, Japan’s Q209 Tankan survey showed that although confidence has
rebounded, it was less than expected and that business spending cuts may
impede the recovery. Meanwhile the country’s unemployment rate for May
was stated at the expected 5.2% versus April’s 5% level. Elsewhere,
India, Asia’s 3rd largest economy, has the potential to grow by 8% this
year, according to the finance ministry. The Nikkei fell by 0.6%, whilst
the Hang Seng lost 2.1%.
The $US index rose by 0.54% this week, to 80.26, with notable losers
including the British Pound and the $Kiwi, which fell by 1.4% and 3.3%
respectively. Sovereign debt yields eased again this week, with the
German bund yield lower by 5 bps to 3.33% and the JGB 10-year down by
7bps, ending the week at 1.31%. The US Treasury 5 yield fell by 4.3% to
2.4% whilst the 10 year yield eased by 0.3%, ending the week at 3.5%.
Within the commodities complex, the $crude oil price fell by 3.6% to
$66.7 a barrel, whilst the $Gold price slipped 0.8%, ending the week at
$932oz.
Next week’s economic data will include the latest trade figures for the
US, the UK and for Japan plus May consumer credit numbers for the US.
Q109 forecast GDP for the Euro-Zone is due out, together with the July
Sentix investor confidence reading. The Bank of England MPC decide on
any interest rate change, whilst the latest PPI, consumer confidence and
industrial production data for the UK will be announced. Finally, May
Japanese machine orders and June bankruptcies will be released.
As the G8 “Heads of State” meet up in Italy next week, the World is
truly at a cross roads on how to deal with the largest financial
downturn since the 1930s. As the private sector scrambles to pay back
debt and reduce spending, the US Government and its central bank have
guaranteed, lent or spent a mind boggling $12.8 Trillion, whilst the EU
have extended $US 5.2 Trillion in official guarantees and funding.
“We have now cut up Washington’s credit card. By
2015, this country can be entirely out of debt”
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