Weekly Market Comment will be away until Friday 9th April.
Overview
Again, small ranges in equity indices as several limp to multi-month highs (FTSE100, Helsinki, Jakarta, S&P500, Saudi, SMI and Thailand a surprising best performer this week). Interestingly, and for a change, Treasury yields simultaneously slipped a little, benchmark ten-year Gilts outperforming (3.92%) so that the spread against their German and US counterparts narrowed to 83 and 28 basis points respectively. Meanwhile ten-year Bund yields are testing the pivotal 3.09% level which has held for the last six consecutive months despite repeated downside testing. Sooner or later it will give way allowing Bund yields to drop back down to the record low at 2.85% of January last year. Hungarian, Polish and Russian benchmark five-year Treasuries are trading at multi-month lows of 6.36%, 5.23% and 4.90% (record low) respectively. The Swiss franc was very much in demand, despite the Swiss National Bank’s repeated attempts at slowing its appreciation against the Euro, so that it is back down at the record low at CHF 1.4300 of October 2008 and the Lehman debacle. Talking of which, dubious accounting practices were found to have been used to flatter its capital position months before its collapse. The Euro dropped back from the high of the last six weeks at $1.3819, the Canadian dollar strengthened to C$1.0060 (strongest since July 2008), and Cable was unchanged at $1.5150. Commodities sidelined and quiet though CME Lumber hit $285.60 per 1,000 board feet, its highest since August 2007, and Live Cattle 97.90 cents per pound its most expensive since October 2008.
Political and Economic Developments
In a week of few important or surprising economic numbers, UK ones were perhaps the most interesting. February Claimant Count Unemployment dipped to 4.9%, from 5.0% over the previous five months, and January ILO Unemployed remained at 7.8%-7.9% where it has been since June 2009. Those out of work dropped 33K to 2.45 million and those on Jobseekers’ allowance –32.3K to 1.59M, but the economically inactive boomed by 149K to 8.16M or 21.5% of the working age population, and the number in employment dropped 54K to 28.8M. Those forced into part time work (as full time jobs were unavailable) hit 1.03M, +29% Y/Y, and full-time students soared by 98K to 2.3M as many prefer learning to doing nothing. The National Health Service added 62K jobs over the last year to employ 1.62M, while private sector employment dropped by 61K last month, and the FSA will hire 460 this year. Meanwhile February M4 Money Supply grew at just 3.6% annualised, the smallest rate in a decade, and net Bank Lending shrank by £6.5B (-9.3% Y/Y) after December’s £3.4B decline.Underlying Themes
‘The Federal Reserve is uniquely suited to supervise large, complex financial organisations and to address both safety and soundness risks and risks to the stability of the financial system as a whole’, said Federal Reserve Chairman Bernanke in his testimony at the House Financial Services Committee on Wednesday. The question, ‘so why didn’t you do that?’, comes to mind. Ex-Fed Chairman Volker continues to insist, ‘I think you can separate consumer protection from safety and soundness’ and nothing should be ‘too big to fail’. Another Ex-Fed Chairman Alan Greenspan came out defending his role in the mess, claiming the housing bubble was caused by ‘geopolitical events’. Understatement from SEC Chairman Mary Shapiro who admitted their oversight of Lehman was ‘flawed in design and execution’ and from Bank of America’s Moynihan, ‘before and during the recent crisis, many of our collective business judgements missed the mark’. You don’t say! Royal Bank of Scotland deputy chief-executive Gordon Pell walked off with a pension pot of £13.58M producing an annual income of £582K, even bigger than ‘Fred the Shred’s’ £342K – produced by taxpayer bailouts.They do things differently in North Korea. Finance planning chief Pak Nam-ki, entrusted to re-denominate the currency and thereby control inflation, slashed the face value of banknotes causing food shortages and unrest. Accused of the crime of being ‘a son of a bourgeois’ he was executed by firing squad in Pyongyang.
