US, economic data released this week
included the May consumer credit numbers, which fell by $3.2BN versus
the -$8.8BN expected and well below the falls seen in April at $15BN.
The trade deficit for May contracted to minus $26BN, whilst the
provisional University of Michigan consumer confidence survey for July
came in lower than expected. General Motors, formally the world’s
largest industrial company, re-emerged from bankruptcy this week, now
61% owned by the US taxpayer who has provided about $US60BN in loans.
The Dow fell by 1.6% whilst the S&P 500 and the Nasdaq slipped by 1.9%
and 2.3% respectively.
The Bank of England MPC left interest rates on hold at 0.5% as the Q109
housing equity withdrawal figure fell by £8.1BN, more than consensus
forecast. Consumer confidence however rose by more than expected in
June. Elsewhere, the Q109 GDP for the Euro-Zone was worse than analyst
forecast, at -4.9% annualised whilst household consumption for the same
quarter fell by the expected 0.5%. A bright spot was that German
manufacturing orders jumped in May by the most in 2 years. The FTSE 100
index fell by 2.6% over the week, whilst the French CAC and the German
DAX were lower by 4.4% and 2.8% respectively.
Out East, Japan’s trade surplus jumped in May, but by less than
expected, whilst machine orders fell by 3%. Meanwhile, passenger car
sales in China soared by 48% in June from a year earlier, catapulting
China to the No 1 position in the world vehicle market this year. The
Nikkei fell by 5.4%, whilst the Hang Seng lost 2.7%.
The $US index was little changed this week, at 80.24. Notable gainers
included the Yen, up by 3.74%, whilst on the downside the SA Rand lost
3.8% and the $OZ was lower by 2.3%. Sovereign debt yields in the UK rose
by just 1bps at 3.74% for the 10 year, whilst the German bund yield
declined by 8 bps to 3.26% and the JGB 10-year yielded 1.295%, down by
2.5bps. The US Treasury 5 yield fell by 8.8% to 2.21% whilst the 10 year
yield fell by 5.7%, ending the week at 3.3%.
Within the commodities complex, the $crude oil price fell by 8.8% to
$60.9 a barrel, whilst the $Gold price slipped by 1.8%, ending the week
at $913oz. It was a year ago this week that the price of crude reached
the dizzy heights of $147 a barrel, with many analysts predicting a
continued surge toward a $200-250 price target, only to see the price
collapse by 78% to a $32 low, before the recent rally towards the $70
mark. The Commodities Futures Trading Commission, or CFTC, has confirmed
increased “regulation,” so as to curb price swings. We should therefore
expect volatility to increase!
Next week’s economic release will include the latest CPI data for the
US, the UK and for the Euro-Zone., whilst the latter announces the trade
balance for May. Capacity utilisation numbers are due out for the US and
for Japan, with industrial production and consumer confidence also due
for Japan. Advance retail sales and housing starts for June will also be
announced for America.
Returning to the G8 meeting, the leading lights, Messrs Obama and Brown,
said “that it was still too early to contemplate rolling back the
aforementioned tidal wave of borrowing and spending.” However, the final
statement went on to say,” Exit strategies will vary from country to
country depending on domestic economic conditions and public finances.”
Make up your own mind.
“Life
is a contradiction at times - as are we”
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