US, economic data released this week
included September PPI which showed inflation falling by 4.8% year on
year versus the prior month’s reading of -4.3%. September housing starts
disappointed but existing home sales beat expectations, jumping by 9.4%
for September, albeit that it was likely due to the impending end to the
$8000 tax credit available to first time buyers. The Dow eased by 0.25%,
whilst the S&P 500 and the Nasdaq ended the week lower by 0.75% and 0.1%
respectively.
The euro-area economy had a wider budget deficit in 2008 than previously
estimated, with five member states breaching the European Union limit as
the total budget shortfall for the 16-nation euro region widened to 2%
of GDP last year, with France, Spain, Greece, Ireland and Malta having
2008 deficits above the EU limit of 3% of GDP. The UK had the biggest
budget deficit for any September since records began in 1993, as the
recession ravaged tax revenue and drove up welfare costs. Despite
forecasts that the recession had ended, Q309 provisional GDP fell by
0.4%, or -5.2% annualised, making it the 6th straight quarter of
contraction, the longest on record. The FTSE 100 index gained 1%, whilst
the French CAC and the German DAX ended lower by 0.5% and 0.05%
respectively.
Out East, China’s economy expanded at the fastest pace in a year as
stimulus spending and record lending growth saw Q309 GDP at 8.9%
annualised. Elsewhere, the Bank of Japan said the economy is improving
in all of the country’s nine areas as the nation emerges from its worst
post-war recession, whilst in the real world September department store
sales fell by 10.5% and forecast machine tool orders crashed by 62.1%
year on year. The Nikkei rose by 0.25% and the Hang Seng jumped by 3%.
The $US index slipped by 0.2% to 75.47, with other fallers over the week
including the Yen, lower by 1.3% and the Euro, which gave up 0.6%.
Sovereign debt yields moved higher this week, with German bund yields up
by 6bps to 3.35%, whilst Japanese and UK 10-year yields rose by 3.5bps,
and 17bps, ending the week at 1.36% and 3.67% respectively. US Treasury
5 and 10 year yields rose by 3% and 1.7%, ending the week at 2.43% and
3.48%.
Within the commodities complex the $crude oil price rose by 1.9% to
$80.5 a barrel, whilst the price of $Gold ended higher by 0.2% at
$1055oz, albeit that the unhedged HUI goldmines index diverged, falling
by 3.6%.
Next week sees the latest house price readings for the US and for the
UK, with Q309 advance GDP, October consumer confidence numbers and
September durable goods orders also due for the US. September consumer
credit and mortgage approvals are due for release for the UK, whilst the
Euro-Zone CPI and consumer confidence data will be announced. CPI,
retail sales and unemployment figures are also due out of Japan.
The $Gold price, the Dow and the Dollar have been in a very tight range
over the past fortnight, a situation which is unlikely to last for much
longer. The three asset classes are inter-related and over the past few
years two of them have been closely correlated and the other one inverse
to them. Early November may see fireworks in the financial markets as
well as the “Guy Fawkes” annual event within the UK.
There will be no “week ending” for the next three week, due to holiday
commitments (unfortunately not me). Normal services will resume for the
week ending 27th November.
“Tobin’s
Q says a lot in respect of US stocks”
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