Investment Markets Overview – w/e 10 Feb 2012

It will be a brief overview for this and for the next couple of weeks as our webmiester, Andy, enjoys a well earned break out East. Normal service will resume at month end.

The excitement of the week came from Facebook, the world’s largest social network, led by 27 year old Mark Zuckerberg, which filed its IPO to raise $5BN. Facebook is rumored to be seeking a $100BN valuation, which would put the company on a multiple of up to 27 times annual revenue and up to 100 times earnings. A strong constitution may be required for this one but if achieved it will put Zuckerberg’s holding at $25BN and leave him with over 50% of the voting rights.

US economic statistics announced this week included December consumer credit, which at $19.3BN far exceeded the consensus expectation for $7BN and fell just shy of November’s $20.4BN. Other data was more subdued, including the December trade deficit, which widened to -$48.8BN against the -$48.5BN forecast and the provisional February University of Michigan consumer confidence reading, which came in at 72.5 against the expected 74.8 and prior 75.The Dow fell by 0.5% whilst the S&P 500 eased by 0.2% and the NASDAQ remained level.

Euro-Zone Finance Ministers sent Greek officials back home to hammer out yet more austerity measures before any bailout can be agreed. Meanwhile, German exports fell by 4.3% in December, against the -1% forecast and the ECB left interest rates on hold at 1%. UK house prices fell by 1.8% year on year in January, according to HBOS, versus the -1.3% seen in December. As expected the Bank of England MPC left rates on hold, at 0.5%, and expanded their QE programme by £50BN to £325BN. The FTSE 100 ended lower by 0.8%, whilst the French CAC fell by 1.6% and the German DAX gave up 1.1%.

Out East, Japanese consumer confidence in January improved to 40 from December’s 38.9 and the expected 38.5. Elsewhere, China’s exports fell in January for the first time in two years, hurt by Europe’s prolonged debt crisis, whilst India’s December industrial production rose by a less than expected 1.8% against November’s 5.9%. The Nikkei gained 1.3% whilst the Hang Seng crept higher by 0.1%.

The $US index rose by 0.25% at 79.1, with other gainers including the Norwegian Krone and the Euro, higher by 0.94% and 0.3% respectively. Losers included the $Singapore and the Yen, lower by 1.56%, and 1.3%. Sovereign debt yields were mixed, with the UK gilt yield down by 7bps to 2.11%, Japan’s JGB yield higher by 3bps to 0.98% and the German 10 year declined by 3bps to 1.91%. Meanwhile, Portugal’s 10 year yield fell by 94bps to 12.48%, whilst Irish yields fell by 2bps at 7.01%. Spanish yields rose by 31bps at 5.3% whilst Italian yields ended the week down by 92bps at 5.6%.  The Greek 2 year yield fell by 25bps to 183%, whilst the 10 year ended lower by 120bps at 32.9%.US Treasury 5 and 10 year yields rose by 2.4% and 1% respectively, ending the week at 0.8% and 1.97%.

Within the commodities complex, the $crude oil price gained 1.4%, ending the week at $99 a barrel, whilst In the precious metals space, the price of $Gold eased by 0.3% at $1725oz, with $Silver  also lower by 0.3% to $33.6oz.

Next week sees the latest on inflation and retail sales for the US and for the UK, with the US also providing January housing starts. The latest GDP data for the Euro-Zone and for Japan will be released, with Japan also announcing December industrial production. The UK provides the latest on unemployment, whilst the most recent trade numbers for the Euro-Zone are due out.
As all eyes are focused on the growing dis-unity of the European Union, it may be of interest to know just how many American states are seeking to, “Issue their own currencies.” A recent CNN money report puts it at 13 states, or 25% of them, are trying to push through legislation that would allow the issuance of an alternative currency to the existing “fiat” Dollar, the glue that binds the American union. We live in interesting times indeed.

                  “An Empire founded by War has to maintain itself by War.”

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