US economic data released this week
included December PPI at 4.4% annualised versus the 4.5% expected and
the 2.4% recorded in November. Housing starts for December were below
forecasts but building permits exceeded. It was an important week for
politics as the Massachusetts Senate election fell to the Republicans,
thereby changing the Senate voting balance, followed by an aggressive
attack by the US President on the banking sector, more below. The Dow
Jones Industrial Average Index reversed about 10 weeks’ worth of
gains in just three days, as it lost 4.1% this week. The S&P 500 and
the Nasdaq fell by 3.9% and 3.6% respectively.
Euro-Zone industrial new orders surprised on the upside in November,
rising by 1.6% against the previous month’s contraction but the ZEW
survey of economic sentiment for January disappointed. UK CPI for
December recorded 2.9% year on year versus November’s 1.9% whilst the
“official” unemployment rate in November was put at 7.8% against the 8%
expected and the prior month reading of 7.9%. The FTSE 100 index lost
2.8%, whilst the French CAC and the German DAX ended lower by 3.4% and
3.1% respectively.
Out East, China’s GDP for Q409 accelerated to the fastest pace since
2007, rising by 10.7% year on year, whilst Japan saw consumer confidence
fall in December and Tokyo department store sales contract by 5%. The
Nikkei fell by 3.6% whilst the Hang Seng gave up 4.3%.
The $US index gained 1.3% to 78.28, with the Yen higher by 1%. Losers
included the Swissie, off by 1.5% and the $NZ, which fell by 3.7%. Risk
aversion once more saw sovereign debt yields fall, with the exception of
Greece, where yields surged another 27bps to 6.25%. German bund yields
fell by 5bps this week at 3.21% and UK 10-year yields eased by 2bps to
3.92%, whilst Japanese JGB yields were unchanged at 1.32%. US Treasury 5
and 10 year yields fell by 3.3% and 2.1%, ending the week at 2.34% and
3.6% respectively.
Within the commodities complex the $crude oil price fell by 4.9% to
$74.5 a barrel and a 1 month low, whilst the price of $Gold ended lower
by 3.4%, closing the week at $1093oz.
Next week sees the latest US and UK housing data and Q409 advance
annualised GDP numbers, with interest rate decisions also to be decided
by the FOMC and the Bank of Japan. Japanese and Euro-Zone unemployment
figures for December will also be released, together with January CPI
for the former and consumer confidence numbers for the latter.
President Barack Obama called for limits on the size and investments of
big Wall Street banks to help stave off a fresh economic meltdown.
Obama's proposal, which would need Congress' approval to take effect,
includes barring banks that take deposits from also trading securities
for their own profit. It also would separate commercial banks from
investment banks, along the lines of the Glass-Steagall Act of 1933,
which, ironically, also saw the establishment of the FDIC for insuring
bank deposits.
“We learn from history that we learn nothing
from history”
