Don't be surprised if US financial markets get another dose of jitters this week as market interest rates again rise on good economic news.
US Government bond yields, the best indicator of interest rate directions for world financial markets these days, have been easier for the past two weeks because of worries about hedge funds and sub mortgage loans and funding.
Those fears seem to have subsided and attention has now switched to the US economy where the non-housing sectors (especially manufacturing and services) seem to be powering along.
That's seen a rise in US rates which accelerated on Friday with the unemployment and jobs numbers for the US for June: around 132,000 jobs were created last month, 75,000 more jobs were found in May and April and they were revised upwards, and the unemployment rate was steady on 4.5 per cent.
But that has seen the US bond yields jumping.
Analysts said the 10-year US bond finished at 5.18 per cent to 5.19 per cent on Friday in New York, up around 0.16 to 0.17 per cent on the previous week's close. It was the biggest weekly rise for 15 months.
This bearishness on rates is going to be emphasized in the coming week with official figures expected to show stronger US consumer confidence.
But we should remember that if rates again nudge past 5.20 per cent for the US 10 year bonds, those fears about mortgage rates, sub loans, the derivatives markets, hedge funds and private equity funding, will re-emerge, just as they did a month ago.
The yield on two-year bonds rose 0.12 per cent to 4.98 per cent last week, so the concern about the economy and the push towards higher rates is widespread. .
The US Labor Department's June jobs report revealed that second-quarter job growth exceeded estimates and US wages and salaries also increased faster forecast.
This of course has the usual collection of short term investors worried about inflation. (It was only the previous week that the same people were hailing the core inflation figures which showed a fall in price pressures in May.)
But with US Federal Reserve Chairman, Ben Breanne, due to speak on inflation at the Tuesday night, our time, attention will be on price pressures and just what the Fed is thinking. It emphasized inflation once again in its statement after leaving the Federal Funds rate steady on 5.25 per cent, last month.
Average hourly earnings increased 3.9 per cent in June from a year earlier; May's increase was revised to 4 per cent from 3.8 per cent and analysts are now worried whether this is running at a level which will concern the Fed.
…………………..
Butstocks headed off any inflation and rate fears last week with a nice little gain for the first week of the back half of 2007.
The Dow ended the week up 1.5 per cent, the S&UP 500 rose a solid 1.8 per cent and the NASDAQ rose 2.4 per cent.
The S&UP 500 Index posted its biggest weekly advance since April to end at 1530.44. The Dow ended at 13,611.68 and the NASDAQ finished on 2666.51.
US retailers surged on speculation that Macy's, the second-largest US department-store chain, may be bought. Shares in Macy's, Sears, the biggest US department store company and Target, the second-largest US discount chain, all had solid rises.
The Australian market rose by around 1.1 per cent last week which was solid, but short of the 1.5 per cent drop the week before.
Despite the continuing strength of BHP Billion (now our first $200 billion company) and Rio, considerably cheaper, our market continues to go sideways.
The rise in oil, copper and lead on Friday will help give it a kick start today, but it might pay to be watchful of what's happening in China.
The stockmarket there is looking a bit toppy, and investor interest seems to be waning with the surge in new trading accounts fading.
