US economic data released this week
showed that the March trade deficit widened to $US40.4BN, slightly worse
than forecast, whilst advance retail sales for April were 0.4% higher
and although slightly better than expectations were a fair bit lower
than March’s 2.1%. Despite much of Monday’s gains being eroded, the Dow
rose by 2.3%, whilst the S&P 500 and the NASDAQ ending higher by 2.2%
and 3.6% respectively.
Euro-Zone Q110 advance GDP data came in at 0.2% or 0.5% year on year,
whilst Industrial production for March was at a higher than expected
1.3%. The UK cobbled together its first “hung parliament” since 1974,
with an apparent mandate to slash the huge budget deficit ASAP. The Bank
of England left interest rates on hold, at 0.5%, as Q110 unemployment
climbed to a 16 year high, whilst April consumer confidence ticked
higher to 74 versus the March reading of 73. The FTSE 100 index gained
2.7%, whilst the French CAC and the German DAX jumped by 5% and 6%
respectively.
Out East the OZ unemployment rate remained steady in April at 5.4%,
whilst in South Korea it fell for a third consecutive month to 3.7% for
March. Elsewhere, Malaysia’s economy grew at the fastest pace in 10
years in Q110, with GDP up by 10.1% year on year. The Nikkei gained 0.9%
whilst the Hang Seng rose by 1.1%.
The $US index jumped by 2.1% this week to 86.2, with other gainers
including the S.Korean Won, up by 2.2%. Losers included the Euro and the
Swissie, falling by 3.1% and 2.2% respectively. Sovereign debt yields
were a mixed bag, as German bund yields rose by 6bps to 2.86% and
Japanese JGB yields ended higher by 3bps, finishing the week at 1.3%.UK
10-year yields were lower by 6bps to 3.75%, relieved possibly that the
newly formed Conservative/Liberal Democrat coalition will provide a
speedier resolution to the Nation’s debt problems. US Treasury 5 year
yields fell by 1% to 2.15% whilst the 10 year rose by 0.4%, ending the
week at 3.44%.
Within the commodities complex the $crude oil price fell by a further 2%
to $73.6 a barrel whilst the price of $Gold saw a 2% gain to $1233oz and
Silver jumped by 5% to %19.3oz.
Next week sees the latest CPI data for the US, the UK and for the
Euro-Zone, with April PPI figures and housing starts also due out for
the US. The Euro-Zone announces April new car registrations and the May
ZEW economic sentiment survey results, whilst in the UK, aside of April
retail sales, we get to see the latest public finances. Japan,
meanwhile, release Q110 GDP figures, April consumer confidence numbers
and April condominium sales.
The political fallout from the Greek crisis is already clear from
Germany’s most important state election, where Chancellor Merkal’s CDU
party gained only 34.6% of the votes, with the consequence that the
CDU-FDP coalition has lost their majority in the Bundesrat Upper House.
This is likely to be only the start of EU political problems, as the
math suggests that whereas the German and French liability to the
bailout stands at Euro123BN and 92BN respectively, of the other
“strained PIIGS,” Italy, Spain and Portugal will have to stump up Euro
81BN, 54BN and 11BN.
“History teaches us that men and nations behave
wisely once they have exhausted all other
alternatives"
