US, economic data released this week
included one bright spot, better than expected vehicle sales for
December, at 11.23 units, but other news was grim. November pending home
sales fell by 16% versus the -2% expected and November consumer credit
collapsed by a record $17.5BN, nearly four times the prior month’s fall
and triple analyst expectations. Finally, and perhaps of most concern,
were the December jobs data. Contrary to the expectations of a stable
non farm payroll report, it showed that the US labour force had shed a
further 85,000 jobs, while the “official” unemployment rate remained
level at 10%. Whilst these figures are bad enough, a peek behind the raw
data reveals that the labour force decreased by 661,000 jobs in December
(if one includes the workers who had officially given up looking for
work) which puts the unemployment rate at 10.4%. The Dow gained 1.8%,
whilst the S&P 500 and the Nasdaq rose by 2.7% and 2.1% respectively.
The UK base rate was left at 0.5% as net lending on dwellings rose by
£1.5BN in November and net consumer credit fell by a further £0.4BN,
albeit that this was better than forecast. December consumer confidence
disappointed, at 69 versus the prior 74 and PPI for the same month rose
by more than expected, at 3.5% annualised. Euro-Zone PPI for November
contracted by 4.4% year on year and retail sales for the same month fell
by 4% versus the forecast -1.9%. The region’s unemployment rate
increased to 10%, the highest in more than 11 years and forecast Q309
GDP contracted by 4% annualised. The FTSE 100 index rose 2.2%, whilst
the French CAC and the German DAX ended higher by 2.8% and 1.4%
respectively.
Out East, December vehicle sales in Japan and India jumped by 36% and
40% respectively, whilst exports, for the same month, soared for South
Korea, Taiwan and for Malaysia, mainly directed at China. The Nikkei
rose by 2.4% and the Hang Seng gained 1.9%.
The $US index slipped by 0.6% to 77.45, with the British pound also
lower by 0.9%. Gainers included the $OZ and the S Korea Won, both higher
by 3%. German bund yields were little changed at 3.38%, whilst Japanese
and UK 10-year yields rose by 7bps, and 5bps, ending the week at 1.36%
and 4.06% respectively. US Treasury 5 and 10 year yields fell by 4.5%
and 0.9%, ending the week at 2.57% and 3.8% respectively.
Within the commodities complex the $crude oil price jumped by 4.25% to
$82.8 a barrel, whilst the price of $Gold added 3.7%, closing the week
at $1137oz.
Next week sees the latest trade data for the US, the UK, Euro-Zone and
for Japan. US Advance retail sales for December will be released, as
will the provisional consumer sentiment figures for January. The
Euro-Zone will release December CPI numbers and the ECB will decide on
interest rate policy, whilst the latest industrial production activity
is released for the UK.
On Xmas Eve, the US Senate voted for a $290BN increase in the US
treasury debt limit to $12.394 trillion versus the treasury’s “debt to
the penny” of $12.311 at 2009 calendar year end. The “debt limit” has
never been reduced since June 1963, when it was at $300BN. Meanwhile,
Fannie and Freddie, those government sponsored enterprises and now 80%
owned by the US Treasury/taxpayer, between them guarantee $5.5 Trillion
of American mortgages, where 25% of them are “under water.” In July 2008
Congress gave the Treasury the right to provide as much aid as it deemed
necessary for F & F, subject to a $200BN cap on the amount that it could
inject. Again on Xmas Eve, the Treasury announced the removal of this
cap and promised to cover all Fannie and Freddie losses through to 2012.
US Treasuries anyone?
“You
can lead a man to Congress, but you can't make
him think”
