US economic data released this week
showed that March personal spending exceeded incomes which probably
explained the better than expected April vehicle sales and March pending
home sales which soared by 23.5% year on year. The eagerly awaited
change in non farm payrolls saw April add 290,000 jobs against the 190K
forecast and the April unemployment rate falling to 9.7% from the 9.9%
seen in March. None of these helped stocks, as the Dow fell by 5.7%,
with the S&P 500 and the NASDAQ ending lower by 6.4% and 8%
respectively.
Euro-Zone interest rates were left on hold, at 1%, as retail sales for
March were zero and March PPI remained static at 0.9% year on year. UK
consumer credit for March rose by less than forecast, as did net lending
on dwellings for the same month whilst April PPI input costs jumped to
13.1% annualised from the 10% seen in March. The main event in respect
of the British financial markets, of course, was the prospect of the
first “hung parliament” since 1974, as the electorate failed to vote any
political party to an outright win. The FTSE 100 index fell by 7.8%,
whilst the French CAC and the German DAX gave up 11% and 6.9%
respectively.
Out East the OZ central bank raised interest rates by ¼% to 4.5%, the
6th rise in the past 7 meetings and its government announced a 40% super
tax to be imposed mining companies. Elsewhere the Chinese central bank
announced a further 50bps increase in the reserve requirement for banks,
the third rise in the past 6 months. The Nikkei fell by 6.3% whilst the
Hang Seng lost 5.6%.
The $US index surged by 3.3% this week to 84.45, with other gainers
including the Yen, up by 2.7%. Losers included the Norwegian krone and
the Euro, falling by 5.3% and 4.2% respectively. Aside of Greek,
Portuguese and Spanish yields, which soared, Sovereign debt yields fell
as stocks took a further bashing. German bund yields sank by 22bps to
2.79% and UK 10-year yields were lower by 8bps to 3.83%, despite the
political uncertainties, whilst. Japanese JGB yields eased by 1bps,
ending the week at 1.27%. US Treasury yields also fell, with the 5 year
collapsing by 10.3% to 2.17% and the 10 year off by 6.4%, ending the
week at 3.43%.
Within the commodities complex the $crude oil price plummeted by 12.8%
to $75.1 a barrel whilst Copper fell by 6%. Meanwhile the price of $Gold
saw a 2.5% gain to $1208oz.
Next week sees the latest trade data for the US, the UK and for Japan,
with April industrial production figures also due out for the US and for
the Euro-Zone. Unemployment rates will be released for the UK and for
OZ, whilst the US also announces April retail sales and the UK April
consumer confidence numbers plus there is an interest rate decision by
the MPC.The Euro-Zone will also release Q110 advance GDP.
US regulators closed four banks this week, bringing the year to date
failures to 68 against the 140 seen for the whole of 2009. The FDIC
Chairperson, Sheila Bair, says that she sees encouraging signs in the
recovery of community banks and any press release following the growing
list of bank failures “parrots out” the standard, “The Government
insures customer deposits up to $250,000 per account.” No official
comments, of course, that the fund set up to pay these guarantees is now
about empty.
“Talk is cheap . . . except when Congress does it"
