The last week in June posted relatively mixed economic data. Early in the week personal spending data proved a disappointment. For the month of May personal spending was flat following an increase of 0.3 per cent in April. This was largely driven by dismal employment prospects and rising inflation. Personal spending for May was the lowest since June 2010, reflecting continued low consumption from the first quarter. As mentioned earlier, inflation still continues to pose problems for the US economy. As measured by the PCE Core (Fed's preferred gauge of inflation), for the month of May inflation rose 0.3 per cent (MoM), following a 0.2 per cent increase a month earlier.
On a year-on-year basis, the index rose 1.2 per cent in May, compared to 1.1 per cent in April. Prices continue to tick upwards, as higher food and energy prices begin to trickle into other prices within the economy. Consumer confidence data released showed worsening sentiment. The ABC Consumer Confidence index fell to 58.5 in June from 61.7 in May, while the University of Michigan Confidence index fell to 71.5 from 71.8. Accelerating inflation, unemployment above 9.0 per cent and falling property values are contributing to pessimism among consumers. With this weak report, and the lack of sustained strength in the job market, there is the likely risk that restrained household demand will dampen the projected pickup in economic growth.
Housing market
Pending home sales surprisingly increased by 8.2 per cent for the month of May, compared to a fall of 11.6 per cent in April. Economists had forecasted a 3.0 per cent increase. Despite the surprise this month, the housing market still continues to struggle. According to one economist, "the May gain only looks good because the prior month was bad." This has been the trend with the housing market reflecting mixed signals month to month, but overall remaining in a depressed state. The week ended on a slightly positive note though with the ISM Manufacturing index increasing to 55.3 from 53.5 in May. Though improved it still only represents a minor recovery from the 60.4 level in April.
Despite showing some improvement, the index still indicates a slow and fragile economic recovery.
Looking ahead to the week July 4 to 8, economic data on factory orders, the ISM non-manufacturing composite and the keenly anticipated labor report are all expected. The labour market continues to be a "thorn on the side" for the United Stateseconomy, with a persistently high jobless rate. With job growth desperately needed to boost the economy, economic data on the labour market will be closely assessed for some sign of improvement in the sector.
Europe:
The Greek parliament approved austerity measures last week that paved the way for a 8.7 billion euro aid package intervention by the European Central Bank (ECB) to prevent that country from defaulting on its debt. ECB officials are currently engaged in discussions to have holders of Greek government debt accept a rollover of some of their bond holdings in order to provide the Greek government with more time to get its finances in order. However, ratings agency Standard & Poor's has indicated that such a plan would qualify as a distressed exchange and would result in a "selective default." This development jeopardises the ECB's discussions as Greek bondholders may not accept the defaulted debt and demand its repayment upon maturity.
Venezuela:
On June 30, Venezuelan president Hugo Chavez revealed that he had surgery to remove a cancerous tumour. Following the news, Venezuelan bonds rallied somewhat as the news filtered through the markets. Venezuelan elections are scheduled for 2012 and concerns about the incumbent's health have raised doubts. Although Chavez outlined his recovering health and commitment to leadership, many question the extent of his illness.
Weekly International Equity Watch
Technology stocks
The S&P 500 rose 5.62 per cent during the week ending July 1 starting the second half of the year on a strong positive note. Energy stocks led the weekly rally returning 7.17 per cent during the week followed by technology and consumer discretionary stocks, which both experienced returns over 6 per cent.
Despite some disappointing economic data on the market, the unexpected acceleration seen in US manufacturing to 55.3 for the month of June provided a welcomed boost to the market. On July 1, the S&P 500 rose 19.03 points, or 1.44 per cent to 1.339.67. and the Nasdaq rallied 42.51 points or 1.53 per cent to 2,816.03. Analysts believe that as concerns over Greece debt default dispelled and manufacturing data came in better than expected, confidence was gradually restored in the market as investors shifted to higher-yielding assets, such as stocks and commodities.
Euro-zone stocks surge
A rally in banks and mining companies after Greek lawmakers passed the five-year austerity package which qualified the country for further aid provided a boost to European stocks. The Stoxx Europe 600 Index rose 4.13 per cent to 274.92 for the week ending July 1. Bank stocks were the best performing industry in the Stoxx 600 during the week led by Greece's three largest lenders. Eurobank, Alpha Bank SA and National Bank of Greece SA. The United Kingdom's FTSE rose 4.67 per cent to 5,989.76 and Germany's Dax index also increased by 4.38 per cent to 7,419.44.
Asian stocks rally
Asian stocks rose as strong manufacturing data in the USeased concerns that the slowdown in the economy may only be temporary. The MSCI Asia Pacific Index rose 3.64 per cent to 135.53.
T&T stock market:
TTSE Composite Index continues advancing
During the week ended July 1, the Composite Index increased by 0.72 per cent to close at a value of 950.53 as nine stocks advanced, six declined and six traded firm. Capital and Credit Financial Group Ltd (CCFG) was the weekly volume leader for another week with 836,023 shares trading with a closing price of $0.22. CCFG also saw the largest price increase, rising by 4.76 per cent during the week for a year to date appreciation of 22 per cent. The worst performer for the week was National Flour Mills Ld (NFM), whose share price fell by 3.41 per cent to close at $0.85. Year-to-date the TTSE Composite Index is up 13.75 per cent.
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