US, economic data released this week
included advance retail sales for January, which surprised on the
upside, whilst the December trade number disappointed, with the deficit
widening to $40.2BN from the $35.8BN forecast. Meanwhile, the
provisional University of Michigan consumer confidence survey for
February fell to 73.7 against the 75 expected. The Dow and the S&P 500
rose by 0.9%, whilst the NASDAQ ended higher by 2%.
Euro-Zone Q409 advance GDP fell by 2.1% annualised against the -1.9%
expected, whilst industrial production in December contracted ay 5% year
on year. The UK trade deficit for December was wider than forecast and
on the residential property front, UK repossessions have reached a 14
year high, jumping to 46,000 in 2009 against the 40,000 seen in 2008.
The FTSE 100 index gained 1.6%, whilst the French CAC and the German DAX
ended higher by 1% and 1.2% respectively.
Out East, China’s banks’ were instructed to raise their reserve
requirement for the second time within a month. From the 25th February
it will increase by 0.5% to 16.5% for big banks and 14.5% for smaller
banks. Meanwhile, Japanese machinery orders climbed by 20.1% in
December, the most in nine years, albeit from a record low. The Nikkei
rose by 0.4% whilst the Hang Seng jumped by 3%.
The $US index dipped by 0.3% to 80.22, with other losers including the
Yen, lower by 0.8% and the Euro, which eased by 0.3%. The gainers
included the $OZ and the $Canadian, which were higher by 2.2% and 2%.
German bund yields rose by 7bps this week at 3.19% and UK 10-year yields
jumped 16bps to 4.04%, whilst Japanese JGB yields declined by 4bps to
1.33%. US Treasury 5 and 10 year yields gained 5.4% and 4.2%, ending the
week at 2.33% and 3.69% respectively.
Within the commodities complex the $crude oil price gained 4.7% to $74.5
a barrel, whilst the price of $Gold rose by 2.6%, closing the week at
$1093oz.
Next week is a shortened trading week for the US, as it celebrates the
President’s day holiday on Monday. A light week of economic news will
include the January PPI number plus housing starts and new permits. The
Euro-Zone December trade balance is due for release, together with the
February consumer confidence data, whilst for the UK we get to see
January CPI, December unemployment and January retail sales. Japan’sQ409
provisional GDP data will be released, together with condo sales for
January.
Whilst the European “problem,” in respect of the PIGS sovereign debt,
has garnered increased attention, there has been little comment about
the increased vulnerability of US municipal bonds, a $US3 trillion time
bomb. As state and municipal payrolls have expanded, state and local tax
revenue have been falling, suggesting that muni-bonds are not quite the
“safe haven” that many investors’ have come to believe in.
“Debt
is the slavery of the free”
