| Weekly Market Overview | ||
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Week ending 9th July 2010 Stocks enjoyed their best week in a year or so, allegedly bolstered by higher growth forecasts by the IMF and speculation that European banks will pass the proposed stress tests. In its latest “World Economic Outlook,” the International Monetary Fund raised the growth expectations for the US, saying it was, “outstripping expectations,” whilst cutting its forecast for the UK, inferred to be due to the larger than expected public sector cuts announced at the recent emergency budget, whilst expressing concerns over Euro-land. As with the main “rating agencies,” the IMF is predominantly an American entity and similarly appeared to have no predictive capability when it came to the financial crisis, so they are probably best to be ignored when making economic forecasts. |
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 Indices - Year to Date (9th July 2010) |
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| It was a thin week for
US economic data during this week’s holiday shortened trading, but
catching our eye were the May consumer credit number, which came in at
-$9BN versus the -$2.3BN forecast and perhaps even more worrying (for
growth that is) was the revised data for April, which went from +$1BN to
a -$14.9BN figure. The Dow jumped by 5.3%, placing it above the 10,000
level once more, whilst the S&P 500 and the NASDAQ gained 5.4%% and 5%
respectively. The ECB left interest rates on hold, as did the Bank of England MPC, at 1% and 0.5% respectively. The Zone’s retail sales in May rose by 0.2% and German industrial production jumped to 12.4% year on year. UK industrial production in May was seen to be 2.6% whilst new car registrations in June fell to 10.8% annualised against May’s 13.5%. The FTSE 100 index jumped by 6%, whilst the French CAC and the German DAX were higher by 6.2% and 4%. Out East, China’s passenger car sales slowed in June, as did home sales in Hong Kong. Investor confidence on China continues to rise however, as Mao Zedong’s “people’s bank,” better known as AgriBank, became the World’s largest ever IPO with subscriptions of $22BN. The Nikkei gained 4.2% whilst the Hang Seng rose by 2.4%. The $US index fell by 0.6% this week, to 83.9, with other losers including the Yen and Sterling, which fell by 1% and 0.9% respectively. Gainers included the Anzac duo, with the $OZ soaring by 4.3% and the $KIWI, which rose by a not to shabby 3.3%. Sovereign debt yields in the main climbed this week as equities enjoyed the “growth hope”, with German bund yields up by 5bps to 2.63% and Japanese JGB yields rising by 6bps, finishing the week at 1.15%. In the downgraded UK, the10-year Gilt yield fell by 2bps to 3.33%. US Treasury yields led the other “growers”, with the 5 and 10 year higher by 1.5% and 2.6% respectively, ending the week at 1.84% and 3.06%. Within the commodities complex the $crude oil price advanced by 5.7% over the week, to $76.3 a barrel whilst in the precious metals complex the price of $Gold saw a 1.5% gain to $1211oz after a pretty volatile week. Next week sees the latest inflation data, in the guise of CPI, for the UK, the US and for the Euro-Zone, with the latter and the US also announcing their latest trade data. The US and the UK release retail sales information whilst the UK and Japan announce June consumer confidence. As three more US banks failed this week, bringing the year to date total to 90, European finance ministers are under pressure to disclose more about the stress tests which account for 65% of Europe’s banking industry and are due to be completed by the end of this month. Regulators are counting on the tests reassuring investors’ and judged by this weeks 9.4% jump in the Bloomberg Europe banks and financial services index they appear to be, whilst other practitioners suggest that the tests are not rigorous enough by assuming that banks will only lose about 17% on Greek government debt and 3% on Spanish bonds. Whoever is correct is of importance as Euro-Land banks have $1.6Trillion exposure to the PIIGS.
“Blessed are the young for they shall inherit the national debt"
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