A rough end to the week in most markets around the world.
That was after US short-term interest rates fell sharply, gold hit $US1150 an ounce, US industrial production slowed and the Japanese economy grew in the third quarter (but remains gripped by deflation).
The US housing sector’s recent improvement vanished, retail sales were OK for October, but not enough to convince investors to ignore the increasing signs of an anaemic US economic recovery.
And investors in the US worried that the important post-Thanksgivings sales period will fade for a second year in a row, just when everyone wants it to kick higher.
US markets are closed, Thursday night our time, for Thanksgiving and Friday is a defacto holiday with people more interested in going shopping (even if they only buy gift cards).
That’s why there are suggestions some investors stocked up on US government debt and cash last week.
Certainly demand from US banks for government securities to dress up their end of year and end of quarter accounts has seen US three month T-notes turn negative last week (i.e. market yields were negative).
Yields on two year and 10 year bonds also remain low, given expectations of a stronger recovery in 2010.
Oil fell below $US77, and finished just above; the US dollar strengthened Friday on the murmurings about the economy and the sharp fall in short term rates.
The Australian dollar finished under 91.50 US cents, for a loss of more than 2 US cents over the week. It had peaked above 94 US cents midweek, a 15 month high.
Gold finished solidly, copper was up a touch and other commodities were mixed.
The Dow and S&P 500 hit 13-month highs this week before easing and ending the week weaker with more signs of fatigue (which it showed in October and September).
The Dow fell 14.28 points, or 0.14%, Friday to 10,318.16; the S&P 500 eased 3.52 points, or 0.32%, to 1,091.38 and the Nasdaq slipped 10.78 points, or 0.50%, to 2,146.04.
For the week, the Dow rose 0.5%, the S&P 500 fell 0.2% and the Nasdaq shed 1%.
The S&P failed to hold above the key 1,100 level and continues to face resistance there.
Yields on US bonds and notes rose marginally Friday after the big fall Thursday.
There’s a $US118 billion bond auction this week of varying maturities.
Demand for short-term debt before year’s end pushed yields on the two-year note below 0.68%, the lowest since last December.
Friday saw the three month T-note end with a yield of 0.1%, up from the Thursday figure of just under zero.
Worse-than-expected quarterly results from computer maker Dell and homebuilder D.R. Horton helped weaken US shares in the third straight negative session for Wall Street.
The 54% slide in Dell’s quarterly profit offset talk in the report of an improved outlook.
Investors in tech stocks had had a tough week as it became clear that the technology sector wasn’t as immune to the influence of the sluggish economy as many investors had been thinking since March.
In Europe, shares fell for a fourth day on Friday after the European Central Bank hardened its stance on a possible withdrawal of stimulus measures, and tightened the criteria for securities banks want to sell to raise cash.
As well, there’s more speculation that the emergency one year funding line to be made next month will be the last and that the ECB will start cutting back.
As a result financial stocks weakened, led by banks in Greece.
The Dow Jones Stoxx 600 Index fell 0.8% Friday to take the extending the week’s decline to 1.7%.
ECB boss, Jean-Claude Trichet, said the bank will gradually withdraw the emergency cash it has pumped into the economy in order to ensure it doesn’t fuel inflation.
“Not all our liquidity measures will be needed to the same extent as in the past,” Trichet said at a conference in Frankfurt.
“Any non-standard measure whose continuation would pose a threat to the achievement of price stability must be undone promptly and unequivocally.”
Indexes fell in 15 of the 18 western European markets. France’s CAC 40 slid 0.8%, Germany’s DAX declined 0.7% and London’s FTSE 100 slipped 0.3%. Greece’s market sank 3.7% to a three-month low on fears the country’s banks were weaker than previously thought.
The MSCI index of Asia Pacific stocks traded outside Japan fell 0.7%, and Japan’s Nikkei dropped 0.5% on the day.
In Tokyo, the Bank of Japan left its benchmark interest rate unchanged at 0.1% at the end of its policy meeting on Friday and said in its monthly assessment that the economy was picking up; and so is deflation with the central bank now forecasting that it will last an extra year, to 2012.
The MSCI Asia Pacific Index (including Japan) fell 1.2% last week.
Japan’s Topix index slid 3.2% (it’s a broader index than the Nikkei which was off 2.8% for the week).
It was the fourth successive weekly fall for both indices as investors turn negative.
Bank stocks are on the nose in Japan after one made a huge $US11.5 billion share issue last week and the deflationary pressures boost real interest rates, and push the yen higher.
Despite the rise in GDP in the third quarter, no one is convinced the economy is really growing. In fact in nominal terms (unadjusted for deflation), the economy is about where it was back in 1992.
The Topix index is down 2.4% so far this year, making it the only loser among the world’s 10 major markets.
In South Korea, the Kospi index jumped 3.1% for the week, but the Shanghai market jumped 3.8% for the week.
The MSCI Asia Pacific Index has risen 31% so far this year, against a 21% gain by the S&P 500 Index in the US and a 23% climb by Europe’s Dow Jones Stoxx 600.
That rise in Asia has come despite the weak perfor
