The DJIA has dropped for 6 consecutive weeks (maybe even 7 if it closes below 11,950 on Friday...phew, it did NOT!)), the longest decline since September/October 2002. Most other indices dipped as well, Brazil’s Bovespa leading the way -4.0% this week and at 60,489 back to where it was in July. Similarly Australia’s S&P/ASX Index slid to 4,465 and the lowest it has been since September, losing 10.25% since mid-April. The Shanghai Composite moving in the same vein 2,641 and back where it was in October. The greenback strengthened a little against most currencies as some continue to believe that it constitutes a ‘safe-haven’ when in ‘risk-off’ mode is in vogue – as we are at the moment. This week’s biggest loser was the EUR/SEK which managed to get to 9.2200 (weakest since November), the EUR itself down at $1.4073. Peripheral sovereign debt woes escalated again, benchmark 10-year Greek Treasuries a record 1550 bps over Bunds, Ireland likewise at 934 over, same for Portugal at 811, Spain and Italy too at 272 and 194 respectively.
Note: since January 2010, domestic Greek banks suffered a net withdrawal of €40bn, 17% of the deposit base. Treasury yields in the other G-7 countries continued to head lower on MORE flight-to-quality. Euribor futures inched up again, some retracing almost 61% of the declines that started in September as we re-think the path for interest rates. Short Sterling and EuroSwiss interest rate futures are clinging to record highs, as are most Eurodollar contracts though the front 2 were slightly ‘rattled’ this week on worries how European banks are funding their USD books.
Weakish May Retail Sales figures from the US (-0.2% m/m) and the UK (-1.6% m/m ex-auto/fuel), with the States seeing rising inflation (CPI +3.6% y/y, PPI +7.3%) as ‘owner’s equivalent rent’ feeds into the equation. Britain’s were somewhat distorted in April by a late Easter, THE Royal Wedding and warm weather. However, supermarket sales dropped a record -3.2% by value and –3.7% by volume as price increases meant people cut back drastically. The problems facing the UK High Street were highlighted in a survey by retail agency Colliers. Of the 364 locations studied 83 were classified as ‘failing’ and 42 ‘degenerating’ so that over 35% faced a downward spiral of empty shops where 25% had falling rents. In an increasingly polarised country London prime rents were +6.0%, peripheral ones +1.0%, and Oxford Street +24.0% as retailers increasingly use posh locations as marketing tools and not just for flogging stuff. The US National Association of Home Builders index unexpectedly dropped to 13, lowest since September, and its 6-month sales index matched March 2009’s record low on weakness in existing home sales and rising building materials costs. Foreclosures and supply overhang mean falling prices but rents are going up as many can’t afford to buy. The Reserve Bank of India raised its key rate by 25 bps to 7.50% because inflation remains stubbornly high.
A motley and unlikely lot have put up their names as candidates for the US Republican presidential nomination. President Obama has moved into electioneering mode as he ‘steps up’ his bid to win a second term in office in November 2012 (FYI...only 2 incumbent US Presidents since 1945 have NOT been re-elected, Jimmy Carter in 1980 and ‘Its’ the economy Stupid, George Bush Snr in 1992, and NO President has been re-elected with the US employment rate ‘above 8.0%!!). US press, fundraisers and politicians are focusing solely on the campaigns. No progress seems to have been made on how to reduce the $14.3 trillion budget deficit which hits its ceiling on the August 2nd when the Treasury can no longer pay its bills i.e. defaults. With QEII ending this month the Federal Reserve’s balance sheet expanded again to a new record in the week ending the June 15th, to $2.811 trillion of which government securities amounted to $1.567 trillion. So nicely put by Canadian Finance Minister Flaherty, ‘it’s a detriment to the international system when we have issues that fester and are allowed to get to the brink before they’re resolved’, no doubt to the ‘delight’ of his US hosts. No hope for serious solutions to urgent problems, like the Afghanistan war, turmoil in Middle East, healthcare, unemployment etc.
Note: since January 2010, domestic Greek banks suffered a net withdrawal of €40bn, 17% of the deposit base. Treasury yields in the other G-7 countries continued to head lower on MORE flight-to-quality. Euribor futures inched up again, some retracing almost 61% of the declines that started in September as we re-think the path for interest rates. Short Sterling and EuroSwiss interest rate futures are clinging to record highs, as are most Eurodollar contracts though the front 2 were slightly ‘rattled’ this week on worries how European banks are funding their USD books.
Weakish May Retail Sales figures from the US (-0.2% m/m) and the UK (-1.6% m/m ex-auto/fuel), with the States seeing rising inflation (CPI +3.6% y/y, PPI +7.3%) as ‘owner’s equivalent rent’ feeds into the equation. Britain’s were somewhat distorted in April by a late Easter, THE Royal Wedding and warm weather. However, supermarket sales dropped a record -3.2% by value and –3.7% by volume as price increases meant people cut back drastically. The problems facing the UK High Street were highlighted in a survey by retail agency Colliers. Of the 364 locations studied 83 were classified as ‘failing’ and 42 ‘degenerating’ so that over 35% faced a downward spiral of empty shops where 25% had falling rents. In an increasingly polarised country London prime rents were +6.0%, peripheral ones +1.0%, and Oxford Street +24.0% as retailers increasingly use posh locations as marketing tools and not just for flogging stuff. The US National Association of Home Builders index unexpectedly dropped to 13, lowest since September, and its 6-month sales index matched March 2009’s record low on weakness in existing home sales and rising building materials costs. Foreclosures and supply overhang mean falling prices but rents are going up as many can’t afford to buy. The Reserve Bank of India raised its key rate by 25 bps to 7.50% because inflation remains stubbornly high.
A motley and unlikely lot have put up their names as candidates for the US Republican presidential nomination. President Obama has moved into electioneering mode as he ‘steps up’ his bid to win a second term in office in November 2012 (FYI...only 2 incumbent US Presidents since 1945 have NOT been re-elected, Jimmy Carter in 1980 and ‘Its’ the economy Stupid, George Bush Snr in 1992, and NO President has been re-elected with the US employment rate ‘above 8.0%!!). US press, fundraisers and politicians are focusing solely on the campaigns. No progress seems to have been made on how to reduce the $14.3 trillion budget deficit which hits its ceiling on the August 2nd when the Treasury can no longer pay its bills i.e. defaults. With QEII ending this month the Federal Reserve’s balance sheet expanded again to a new record in the week ending the June 15th, to $2.811 trillion of which government securities amounted to $1.567 trillion. So nicely put by Canadian Finance Minister Flaherty, ‘it’s a detriment to the international system when we have issues that fester and are allowed to get to the brink before they’re resolved’, no doubt to the ‘delight’ of his US hosts. No hope for serious solutions to urgent problems, like the Afghanistan war, turmoil in Middle East, healthcare, unemployment etc.
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