United States: The week ending April 15 released economic data on the US trade balance, retail sales and inflation. The trade deficit for February narrowed to US$45.8 billion from US$47 billion, falling short of analyst's forecasts of US$44 billion. Soaring commodity prices continue to hurt the economy. Both exports and imports fell during the month. Advance retail sales increased for a ninth consecutive month, although at a slower rate. Retail sales advanced 0.4 per cent, down from the revised 1.1 per cent in January. This highlights the impact of higher inflation on US consumer spending. Headline inflation rose 0.5 per cent for the second consecutive month after increasing 0.4 per cent in both December 2010 and January this year. The consumer price index rose to 2.7 per cent year on year in March, from 2.6 per cent a month earlier. Higher commodity prices, particularly energy have been the key driver. Core inflation fell 10 basis points to 0.1 per cent in March (month on month), showing that higher commodity prices have not filtered into general prices.
On April 18, Standard and Poor's revised its outlook on the United States long-term sovereign rating to negative. At the same time, it affirmed the country's AAA long term and A-1+ short-term sovereign credit ratings. The negative outlook highlights S&P's view that there is at least a one-in-three likelihood that they could lower the US long-term rating within two years. It also reflects their view of the increased risk that the political negotiations over when and how to address both the medium- and long-term fiscal challenges will persist. US debt levels have increased, ballooning to in excess of US$14 trillion, noticeably larger than most AAA rated sovereigns. For the week of April 11 to 21, economic data on the US housing sector will be released. Following the record low new home sales level recorded in February, this week's report will be keenly assessed. Existing home sales is due for release mid-week.
Europe: In an attempt to assure markets, the ECB vice-president indicated that he was of the view that Portugal will be the last country to require aid. There is speculation that Greece will have to default on it debt. The ECB policy interest rate is expected to increase to 1.75 per cent by the end of the year, but this has not been confirmed by ECB officials.
China: China will increase banks' reserve requirements from April 21. The reserve ratio will increase by 50 bps to 20.50 per cent and the Bank of China's governor was quoted as saying that he "sees no 'absolute' limit on how high reserve requirements can go." This is the country's fourth interest rate increase since the start of the year. Rating agency Fitch downgraded the outlook on China's currency debt rating from "stable" to "negative." The revised outlook reflects Fitch's concern over the scale of sovereign contingent liabilities and risk to macro-financial stability arising from the very rapid pace of bank lending in recent years, especially against the backdrop of rising real estate valuations and inflation.
Ireland: Ireland's credit rating was downgraded by Moody's Investors Service from Baa1 to Baa3 with a negative outlook. Standard & Poor's on April 1 cut Ireland's rating one level to BBB+ with a stable outlook
Turkey: Turkey's foreign currency ratings was affirmed at BB with a positive outlook.
According to the ratings agency, the positive outlook reflects the likelihood of an upgrade if Turkey's external imbalances stabilise as domestic savings rise and the economy returns to more sustainable growth. The key rating constraint continues to be its high and widening external deficits, exacerbated by an acceleration of domestic credit growth.
Weekly international equity watch
The US equity market continued its downward trend during the week ending April 15, 2011, as the S&P 500 index lost 0.70 per cent of its value, closing at 1,319.68. The market saw a short lived rally on the first trading day of the week as investors grew anxious over the results of first quarter earnings and new acquisition deals. Despite higher than expected earnings at US$0.28 per share, Alcoa reported sales that were below analyst's estimates sending stocks lower. Growing concern over slower growth in Japan and the dampening effect on global growth also added to the fall in global markets. The S&P 500 remained relatively unchanged dampened by a fall in bank stocks following JPMorgan's warning of continued investors' mortgage related losses for some time. Financial stocks led the decline in the market, as shares of Bank of America, Citigroup and Wells Fargo fell in response to the news.
By the end of the week, better than expected economic data gave the market a welcomed boost as investors remained disappointed with company earnings. This 0.39 per cent daily rise on April 15 was still lower than the week's opening value bringing the year-to-date return on the S&P 500 to 4.93 per cent. Asian stocks were slightly lower during the week as China's inflation rose faster than estimated and the IMF cut growth forecasts for the US and Japan. The MSCI Asia Pacific Index closed the week at 135.82, representing a weekly loss of 0.52 per cent. Hong Kong's Hang Seng Index was also down 1.59 per cent.
The Japanese Nikkei 225 also recorded a loss of 1.32 per cent as the government raised the 'severity rating' of the post-earthquake nuclear crisis to the highest level. The 50 European blue-chip stocks as measured by the Euro Stoxx 50 Index was up 1.87 per cent during the week boosted by results at companies from Nestle SA to Syngenta AG and a better than expected US consumer confidence report.
T&T stock marlet
The Composite Index increased during the week ending April 15, rising by 1.29 per cent to a value of 894.20 as two stocks declined and eight advanced. National Commercial Bank Jamaica Ltd (NCBJ) was the weekly volume leader with 384,064 shares trading with a closing price of TT$1.61, marking a 7.33 per cent return on capital gain. The price of Angostura Holdings Ltd (AHL) continued to appreciate, rising by 31.94 per cent during the week to close at $6.61. CCFG saw the largest price decline dropping by 5.88 per cent to a close of $0.16 with a total of 59,920 shares trading for the week. Year-to-date, the TTSE Composite Index is up 7.01 per cent.
Energy Prices
08-Apr-11 15-Apr-11 Change
Brent Crude Oil price
(US$/bbl) $126.74 $124.06 -2.10 %
WTI Crude Oil Price
(US$/bbl) $112.79 $109.66 -2.80 %
Henry Hub Nat Gas Price
(US$, mmbtu) $4.06 $4.20 3.40 %
Source: Bloomberg, First Citizens Investment Service Research Department