| Weekly Market Overview | ||
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Week ending 16th July 2010 Three months after being sued by the US Government, Wall Street’s most powerful firm, Goldman Sachs & Co, agreed to pay a record $550 million to settle civil fraud charges that it misled buyers of complex investments. The SEC had alleged that Goldman sold mortgage-related investments without telling buyers that the securities had been crafted with input from a client, mega hedge fund Paulson & Co that was betting on them to fail. The securities cost investors close to $1 billion while helping Paulson to capitalise on the housing bust. Of the $550 million total, $535 million fine and $15 million in restitution of fees GS collected, $300 million will go to the government and $250 million goes to compensate two European banks that lost most of the $1BN their investments, triggering a substantial loss to the Royal Bank of Scotland or should we say the UK taxpayer. |
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 Indices - Year to Date (16th July 2010) |
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| US economic data
announced this week included the May trade balance, where the deficit
widened to -$42.3BN versus the -$39BN forecast and April’s -$40.3BN.
June advance retail sales fell by 0.5%, worse than expected whilst June
CPI came in at a lower than expected 1.1% year on year. The main event,
however, was the provisional University of Michigan consumer confidence
reading which at 66.5 was way below the forecast 74 and June’s 76. It
was a “game of tow halves” for stocks, with the Dow lower by 1%, but
still above the 10,000 level, whilst the S&P 500 and the NASDAQ lost
1.2% and 0.8% respectively. Euro-Zone CPI for June came in at an as expected 1.4% annualised and the Zone’s May trade balance saw a widened deficit of E3.4BN against April’s Euro 1.8BN. June CPI for the UK came in at 3.1% year on year plus a better than expected consumer confidence reading for June, at 63 and supported by the 3 month employment rate, which at 7.8% was better than the forecast 7.9%. The FTSE 100 rose by 0.5%, whilst the French CAC and the German DAX were lower by 1.5% and 0.4%. Out East, Japanese consumer confidence improved to a better than expected 43.6 against May’s 42.7 number whilst in China, Q210 GDP eased to 10.3% from Q1’s 11.9%. Elsewhere, the Thai central bank raised interest rates by ¼ to 1.5%, the first rise in almost two years. The Nikkei fell by 1.9% whilst the Hang Seng gave up 0.6%. The $US index fell by 1.7% this week, to 82.5, with other losers including the $Canadian and $OZ, which fell by 2.3% and 1% respectively. Gainers included the Yen, which rose by 2.4%. Sovereign debt yields, with the exception of UK gilts, fell this week as equities reversed course. German bund yields were lower by 3bps to 2.6% and Japanese JGB yields fell by 7bps, finishing the week at 1.09%. The 10-year Gilt yield was unchanged at 3.33%, whilst US Treasury 5 and 10 year yields fell by 8% and 3.8% respectively, ending the week at 1.69% and 2.94%. Within the commodities complex the $crude oil price eased slightly to $76.2 a barrel whilst in the precious metals complex the price of $Gold saw a 1.5% fall to $1193oz after another volatile week. Next week sees the latest US home sales and housing starts and the latest consumer confidence data for the Euro-Zone. The UK releases mortgage approvals for June plus retail sales information for the same month and we get to see Q210 advance GDP numbers. Meanwhile, Japan announce the latest leading indicators. Returning to Paulson & Co, they appear to be at the forefront of the recent rush into the precious metals complex, along with other hedge funds and central banks, the latter renowned for their “impeccable” timing into various asset classes, including that of gold. Paulson has allegedly placed a full third of its assets under management into gold. Poetic justice perhaps.
“A gold mine is a hole in the ground with a liar standing next to it"
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