US, economic data released this week
included personal income and expenditure numbers for the month of
December, where income rose and spending fell, supportive that the
“crowd” are changing their ways to rebuild savings rather than debt.
This trend change is also supported by consumer credit falling in the
same month, and for the 11th consecutive month. The latest jobs data
surprised most analysts, as the January unemployment rate fell to 9.75
from the previous 10%, albeit that non farm payrolls were below
expectations. In what was a volatile week, with the Dow dipping
intra-day below the 10000 level for the first time since July 2009, the
senior index only fell by 0.5%, whilst the S&P 500 and the Nasdaq ended
lower by 0.7% and 0.3% respectively.
Euro-Zone and British interest rates were left at 1% and 0.5%
respectively, despite December PPI for the “Zone” coming in at -2.9%
annualised against the UK’s PPI for January recording an 8.4% year on
year jump. Consumer confidence for the UK in January was higher than
expected, whilst December retail sales for the Euro-Zone were zero on
the month and -1.6% annualised. The FTSE 100 index lost 2.5%, whilst the
French CAC and the German DAX ended lower by 4.7% and 3.1% respectively.
Out East, Japan’s sovereign credit rating outlook was lowered by
Standard and Poor’s on concerns about the world’s largest debt load, or
more precisely the lack of any plan to rein it in. Meanwhile it was
confirmed that over half of Japanese exports now go to Asia, with China
representing 19% of total exports versus the 16% sent to the US and the
12.5% to Europe. The Nikkei fell by 1.4% whilst the Hang Seng gave up
2.3%.
The $US index gained 1.2% to 80.44, the first move above the 80 level
since July of last year. Other gainers included the Yen, up by 1.4%,
whilst the losers included the British Pound, off by 2.2% and the Euro,
which fell by 1.3%. German bund yields fell by 8bps this week at 3.1%
and UK 10-year yields eased by 3bps to 3.88%, whilst Japanese JGB yields
gained 5bps to 1.36%. US Treasury 5 and 10 year yields fell by 3.9% and
0.4%, ending the week at 2.23% and 3.57% respectively.
Within the commodities complex the $crude oil price fell by 2.2% to
$71.2 a barrel, whilst the price of $Gold ended lower by 1.4%, closing
the week at $1066oz. The spot price for $Silver and $Copper, both metals
sensitive to economic activity, fell by 6% over the week.
Next week sees the latest US and UK trade data and retail sales numbers,
with the former also announcing February consumer confidence sentiment
and the latter the Bank of England quarterly inflation report. The
Euro-Zone releases Q409 GDP figures and industrial production updates
for December, whilst the latest consumer confidence indicator is due out
for Japan.
The G7 finance ministers meet up in the Canadian Arctic this weekend and
high on the agenda will be the Euro-Zone’s burgeoning debt crisis and to
whether a bailout will be required for the peripheral Mediterranean
member states. It is quite ironic that as all eyes are on these
countries, the USA has quietly given itself permission to borrow and
spend an additional $US2.2 Trillion. Perhaps the problems of Europe are
a dress rehearsal for the US?
“If
something cannot inflate forever - it will
deflate”
