Week ending 28th May 2010 

US economic data released this week showed that April durable goods orders rose by a more than expected 2.9%, buoyed by large commercial aircraft orders. April new home sales also surprised, jumping by 14.8%, after the revised 29.9% for March, as buyers rushed to qualify for the tax credit, worth up to $8000. May consumer confidence numbers were better than forecast, but Q110 house prices were 1.9% lower than a year ago and Q110 GDP was revised lower to 3% annualised against the earlier 3.4% suggested. During a very bumpy week the Dow fell by 4%, whilst the S&P 500 and the NASDAQ ending lower by 4.2% and 5% respectively.

It was a light week for Euro-Zone economic news, but included March industrial new orders, which rose by 5.2% against the 2.5% forecast. UK Q110 GDP rose by 0.3%, albeit that it’s still contracting on an annualised basis by 0.2%, whilst May consumer confidence came in lower than expected. The FTSE 100 index gained 2.5%, whilst the French CAC and the German DAX were higher by 2.4% and 2% respectively.

Out East Japan’s exports soared by 40% in April, a fifth consecutive month of gains, offsetting the not so good news on household spending which fell by 0.7% year on year against the 2.5% expected and previous month’s 4.4%. Elsewhere, Taiwan’s unemployment rate fell to 5.4% in April. The Nikkei eased lower by 0.2% whilst the Hang Seng added 1.1%.

The $US index jumped by 1.7% to 86.71, with other gainers including the South Korean Won and the $OZ, rising by 2.8% and 1.9% respectively. Losers included the Japanese Yen, down by 1.2% and the Euro, lower by 2.4%.Sovereign debt yields moved higher this week, as European concerns rose. German bund yields increased by 2bps to 2.68% and Japanese JGB yields added 1bps, finishing the week at 1.25%.UK 10-year yields rose by 3bps to 3.58%, whilst US Treasury 5 and 10 year yields gained 5.2% and 3.2% respectively, ending the week at 2.1% and 3.3%.

Within the commodities complex the $crude oil price gained 5.6% to $74 a barrel whilst the price of $Gold saw a 3.2% rise to $1215oz.
Next week sees the latest vehicle sales for the US, the UK and for Japan, plus the most recent home sales and employment data for the US. The Euro-Zone release April PPI, retail sales and unemployment figures, together with Q110 provisional GDP guidance and May consumer confidence numbers. The latest nationwide average house price and consumer credit figures are due out for the UK, whilst in Japan April housing starts and industrial production information will be announced.

Returning to “austerity,” the new British coalition government has also been quick off the mark, warning the electorate about the dire state of the public finances and the pain to come. This week saw the launch of, “The Office for budget management,” to make sure that government run their financial affairs prudently. Funny that, as I thought that was the job of the UK treasury, under the stewardship of the Chancellor, who for 10 of the past 13 years was “Prudence Brown.”

“Arrogance diminishes wisdom"