| Weekly Market Overview | ||
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Week ending 2nd July 2010 Two weeks away from “week ending” and the extreme optimism displayed in stocks and commodities has evaporated, as concerns return in respect of the two key US dynamics, that of jobs and housing. Despite “official” US unemployment in June falling to 9.5% against the 9.8% forecast and the prior 9.7%, private payrolls are contracting across all sectors and are now being compounded by public sector jobs as states struggle with ballooning deficits. With 8 million jobs lost since December 2007, we should not be surprised to see a sagging property market, as evidenced by May pending home sales which fell by 30% from April, the largest drop since records began in 2001. |
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 Indices - Year to Date (2nd July 2010) |
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| US economic data
released this week included a disappointing a revised Q110 GDP number
from 3% annualised to 2.7% and the latest consumer confidence data,
courtesy of the conference board, which for June came in at 52.9 against
the revised 62.7 seen in May. The Dow fell by 4.5%, bringing the bell
weather index back under the 10,000 level, whilst the S&P 500 and the
NASDAQ slid by 5% and 5.9% respectively. June CPI for the Euro-Zone was stated at 1.4% year on year, lower than forecast, whilst the region’s unemployment rate for May remained at 10%. UK consumer credit for May was slightly ahead of expectations, as were net lending on dwellings. The FTSE 100 index fell by 4.1%, whilst the French CAC and the German DAX were lower by 4.9% and 3.9%. Out East, the main event was Japan’s quarterly Tankan survey which showed that business confidence is on the rise. Elsewhere, the Reserve Bank of India increased interest rates by 0.25%, the third such move this year, as it worried over a CPI rate of 10.3%. The Nikkei slumped by 5.5% whilst the Hang Seng gave up 3.8%. The $US index fell by 1% this week, to 84.5, with other losers including the $OZ and $KIWI, which fell by 3.7% and 3.5% respectively. Gainers included the Swiss franc, higher by 2.7% and the Yen, which rose by 1.7%. Most major Sovereign debt yields declined this week as equities tanked, with German bund yields lower by 3bps to 2.58% the UK 10-year yield down by 3bps to 3.35% and Japanese JGB yields falling by 5bps, finishing the week at 1.09%. US Treasury yields followed suit, with the 5 and 10 year lower by 5.2% and 4.3% respectively, ending the week at 1.8% and 2.98%. Within the commodities complex the $crude oil price plunged by 8.5% over the week, to $72.2 a barrel whilst in the precious metals complex the price of $Gold saw a 3.5% decline to $1212oz and silver fell by 6.6% to $17.89oz. Next week sees interest rate decisions for the UK and for the Euro-Zone, with the former also announcing the latest trade data and new car registrations, whilst the latter is due to release May retail sales numbers and revised Q110 GDP information. May trade data is also due out for Japan, together with the latest bankruptcy numbers. During a holiday shortened trading week for the US, we should see the latest consumer credit data. Returning to those US states that are struggling with budget deficits and therefore slashing jobs and services, and there are 47 of them, California, New York and Illinois appear to be in the direst condition. Illinois has refused to pay for the services provided from the likes of its schools to the rent on its offices as the state’s budget deficit of $US12BN approaches 50% of its spending commitment.
“Man cannot live by incompetence alone"
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