US economic data released this week
included July PPI, which fell by 0.9% and now falling at an annualised
6.8% and housing starts for the same month, less than expectations,
whilst mortgage delinquencies for Q209 rose to 9,2% from the previous
quarter’s 9.12%. On the plus side, existing home sales in July jumped to
7.2% against forecasts of 2.1% and double June’s 3.6%. Federal Reserve
Chairman Bernanke raised hopes that the global recession was over (more
below), which excited market participants. The Dow and the S&P 500
advanced by 2% and 2.2% respectively, whilst the Nasdaq ended higher by
1.8%.
Euro-Zone economic confidence, as evidenced by the August ZEW survey,
soared to 54.9 versus the 43 expected and the previous 39.5 number,
whilst in the UK retail sales for July surprised analysts by growing by
3.3% versus the 2.7% expected. Elsewhere Norway, an economy that has
seen its largest. Government stimulus in three decades, returned to
growth in Q209 at 0.3%. The FTSE 100 index rallied by 2.9% over the
week, whilst the French CAC and the German DAX were higher by 3.5% and
2.9% respectively.
Out East, the Japanese economy emerged from its deepest post war
recession in Q209, growing by 0.9%, lower than analysts forecasts of 1%.
Department store sales for July disappointed however, coming in at
-11.7% year on year versus the prior reading of -8.8%. Elsewhere,
foreign direct investment in China fell for a 10th straight month in
July. The Nikkei ended lower by 3.4%, whilst the Hang Seng fell by 3.3%.
The $US index declined this week by 1% to 78.04 with gainers including
the $Canadian, higher by 2.9% and the Swiss Franc which gained 1.3%.
Sovereign debt yields fell again this week, with the German and Japanese
JGB yields lower by 1bps and 7bps respectively, ending it at 3.31% and
1.305%, whilst the UK 10 year eased by 4bps, at 3.64%. Meanwhile the US
Treasury 5 year yield rose by 2% to 2.08% as the 10 year ended unchanged
at 3.56%.
Within the commodities complex, the $crude oil price jumped by 6.2% to
$73.9 a barrel, whilst the $Gold price rose by 0.5%, ending the week at
$954oz.
Next week sees Q209 GDP numbers for the US and for the UK and the latest
house prices for them both. Consumer confidence data is also due out for
the US and for the Euro-Zone, whilst it’s a busy week for Japanese
releases, including the July trade balance, CPI and unemployment.
Fed Chair, Ben Bernanke, gave a speech on Friday to an annual gathering
at Jackson Hole, Wyoming. Within the speech (no doubt with one eye on
his re-election chances in 2010) he inferred that, “I and other Central
Bankers, have saved the World from disaster by flooding it with money!”
His history of the crisis essentially begins in September 2008, and
ignores the actions and decisions by the same central bankers that led
to disaster.
“He who is not very strong in memory should not
meddle with lying”
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