US economic data released this week
included the latest on vehicle sales, which jumped to 11.3m units in
June from May’s 9.7m. Unsurprisingly, the proposed increased “cash for
clunkers stimulus” for $2BN was signed by Obama at lightening speed.
Pending home sales in June rose by 9.2% on a year earlier but by far the
most “positive” news for stocks was that on US unemployment, as
evidenced by the “official” drop to 9.4% for July, lower than consensus
forecasts of 9.6% and the 9.5% figure released in June. More comment on
this below. The Dow gained 2.2% and the S&P 500 rose by 2.3%, surpassing
the psychologically important 1000 barrier for the first time since last
November. The tech rich Nasdaq added 1.1%.
Euro-Zone PPI fell at an annualised 6.6% in June, the most in 28 years,
whilst the retail sales fell by 2.4% year on year, the worst decline in
13 years. As expected the ECB left interest rates on hold, at 1%, whilst
their Bank of England counterpart also left rates at 0.5% and surprised
the majority by announcing a £50BN increase in its quantative easing
plan. UK consumer confidence in July rose by more than expected, as did
new car registrations. Meanwhile July PPI came in at -1.4% and -12.2%
annualised, worse than forecast. The FTSE 100 index gained 2.7% over the
week, whilst the French CAC and the German DAX were higher by 2.8% and
2.4% respectively.
Out East, Japanese vehicle sales in July fell by an annualised 4.2%,
whilst Japan Airlines Corp, Asia’s largest airline by sales, announced
its biggest quarterly loss in at least six years. Meanwhile the Chinese
Central Bank is expressing concern over bank lending, after it has
presided over an annualised M2 money supply growth of 28.5% in the year
to June and seen bank loans soar by 300% from a year ago, equivalent to
25% of 2008 GDP. The Nikkei ended higher by 0.5%, whilst the Hang Seng
fell by 1%.
The $US index rallied this week by 0.9% to 78.97, with other notable
gainers included the Brazilian Real and the Mexican Peso, up by 2.5% and
1.9% respectively, whereas fallers included the Yen & the Euro, lower by
2.9% and 0.6%. Sovereign debt yields were again mixed this week, with
the German and Japanese JGB yields higher by 21bps and 2.5bps
respectively, ending it at 3.51% and 1.43%, whilst the UK 10 year was
little changed, at 3.79%, despite the QE increase. The US Treasury 5 and
10 year yield soared by 11.5%% and 10% respectively, ending the week at
2.83% and 3.85%, the worst weekly performance for US Treasuries since
March 2003. The better than expected employment data, suggesting
stronger economic growth, not to mention the huge increase in debt
supply this year, including TIPS, is pressurising yields.
Within the commodities complex, the $crude oil price rose by 2.1% to $71
a barrel, whilst the $Gold price added just 0.2%, ending the week at
$956oz, despite the news that European Central Banks had agreed to a 3rd
5 year cap on Gold sales, reducing the annual limit to 400 metric tons
from the previous 500.
Next week sees the latest trade figures for the US, the UK and for
Japan, together with the latest CPI data for the US and for the
Euro-Zone. The advance Q209 GDP numbers for the “Zone” will also be
announced, together with US retail sales and the UK employment detail.
The latest bankruptcies and machine orders are also due out for Japan,
but all eyes will be on the FOMC, when it discloses any change on
interest rate policy.
Returning to that US employment data, we also note some news on incomes.
They fell by 1.3% in June and by 3.4% year on year, the worst annualised
decline since records began in 1959, but of particular interest was that
private wages & salaries declined by 6.5% over the year, those within
the Government sector, which now represents 19% of the total American
workforce, rose by 4.1%
“We
have the best government that money can buy”
[ Up ] [ Next ]
