April 18, 2008
Economic news continued to portray softness in the economy and a pick-up of inflationary pressures, but earnings for US exporting companies provided a sign of firmness in an otherwise deteriorating environment. The equity markets reversed the negativity which came from the GE report the previous week. Treasuries plummeted and CDS spreads narrowed. The dollar was mixed. Oil reached new highs, closing over $116 per barrel on Friday. To read the full Economic Comments for the week ending April 18, click the attachment.
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April 11, 2008
Economic news continued to portray softness in the economy, but GE’s surprise earnings-miss unveiled the equity markets’ fragility. Treasuries rebounded and CDS spreads widened. According to www.markit.com, investment grade corporate swaps widened 20 basis points to 129 basis points, giving up some of the QTD gains. The dollar declined against the Euro. Oil increased, closing over $110 per barrel. To read the full Economic Comments for the week ending April 11, click the attachment.
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April 04, 2008
Economic news remained weak, but somewhat better than expected. Fed Chairman Bernanke acknowledged that the US may have entered a period of contraction in his testimony to the Congress. The start of the 2nd quarter seemed to provide either hope for the future or realization that the markets had over-reacted. Equity markets rallied and government bond yields backed up. Corporate spreads narrowed, but not as much as indicated by the credit default swap markets. The US dollar gained against the European and Japanese currencies. Oil traded above $100, closing above $106. To read the full Economic Comments for the week ending April 4, click the attachment.
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March 28, 2008
Again this week, US Economic softness persisted, but inflation was well contained. Credit spreads narrowed, some equity markets rose and the US dollar fell against the European currencies. Oil prices rose $3 to $105.62. To read the full Economic Comments for the week ending March 28, click the attachment.
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March 21, 2008
US Economic weakness persisted in this week’s releases, but inflation was well contained. The Fed’s actions may have convinced some that it was addressing the problems. Credit spreads narrowed, some equity markets rose, and commodity prices fell; the US dollar rose against the European currencies. To read the full Economic Comments for the week ending March 21, click the attachment.
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March 14, 2008
Economic weakness persisted, particularly in the US. To counter the liquidity crisis, the US Fed took the additional step of protecting Bear Stearns from rumored collapse. Inflation remained mercifully contained, but lack of confidence in the US economy put further pressure on the US dollar. Equities finished mostly lower; government bonds rallied, and credit spreads widened. Oil broke through and settled above $110 on further US dollar weakness. To read the full Economic Comments for the week ending March 14, click the attachment.
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March 07, 2008
Weak economic numbers precipitated further deterioration in the capital markets this week. Corporate spreads widened, Government bond yields dropped, and equity markets retreated to levels not seen since 2006. The dollar hit new record lows against the Euro and the Yen. Oil reached new record highs on the dollar weakness before closing above $105 a barrel. To read the full Economic Comments for the week ending March 7, click the attachment.
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February 29, 2008
The hopeful start to the week was dashed by Friday on the heels of weaker economic data, less confident testimony from the US Fed Chairman, and more turmoil in the credit markets. An announcement of further write-offs at AIG worried investors about more turmoil to come for financial institutions. Government bond prices were higher; equity markets and the US dollar fell. Oil closed over $100. To read the full Economic Comments for the week ending February 29, click the attachment.
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February 22, 2008
This week’s few economic releases continued to show softness with some pick up in inflation. Yet, it was the proposed rescue of bond insurer Ambac’s business that saved most the equity markets from another weekly loss. Bond markets were lower; credit spreads were wider. Oil closed under $100, having flirted with that level for most of the week. To read the full Economic Comments for the week ending February 22, click the attachment.
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February 15, 2008
This week’s soft economic data was reinforced by the US Fed Chairman’s testimony on the sluggishness of the US economy and greater likeliness of further rate cuts. Oil rose to the mid-90’s. Equities were mostly higher. Yield curves steepened with higher long-term rates and wider credit spreads. To read the full Economic Comments for the week ending February 15, click the attachment.
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February 08, 2008
This week’s economic releases provided the backdrop, which led the G-7 finance ministers to issue a warning of “downside risks” at the end of their weekend meeting; The G-7 committed to take the necessary actions to counter the housing- and credit-led downturn. The US Senate passed its tax-rebate plan, bringing fiscal stimulus closer to fruition in the US. In a flight to safety, Government Bonds rallied and stocks declined. Credit spreads widened further. Oil prices climbed back above $90. To read the full Economic Comments for the week ending February 8, click the attachment.
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February 01, 2008
The FOMC met and lowered rates another 50 basis points this week. Economic news was softer in the US and the UK, but mixed elsewhere. Stock markets rallied on promises of future US rate cuts and fiscal stimulus. The bond markets were higher in the US and Europe, but lower in Asia. Oil closed the week below $90 on prospects of slower growth. To read the full Economic Comments for the week ending February 1, click the attachment.
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January 25, 2008
Unexpected events drove the markets this week. Economic releases and the start of earnings season had little effect. The US Fed surprised the market with a 75 basis point cut to 3.50%. The US President and the Democratic-led House of Representatives came to agreement on a fiscal stimulus package. For this week, the sub-prime impact on financial institutions took a back-seat to Societe Generale’s announced 5 billion Euro fraud write-down. Oil traded the week below $90, but closed just above it. US Stocks and Bonds rallied in the 4-day trading week, but were mixed elsewhere. The small week-over-week changes masked the wider swings during the week. To read the full Economic Comments for the week ending January 25, click the attachment.
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January 18, 2008
Economic reports were mixed. The prospect of help from the Administration, Congress, and the Federal Reserve Chairman failed to allay the recession fears of investors. Equity markets declined further; Government Bonds rallied, and credit spreads widened in a global aversion to risk. Bloomberg’s CDS Index of investment grade 5-year swaps widened another 10 basis points to 106. Oil fell to close at $90.60. To read the full Economic Comments for the week ending January 18, click the attachment.
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January 11, 2008
Recession fears gripped the markets even though the economic releases were not that negative. Even Chairman Bernanke’s assurances of Fed’s rate cuts were not sufficient to prevent equity markets from falling again this week. Government bonds rallied, but credit spreads widened. Oil prices eased back down below $93. To read the full Economic Comments for the week ending January 11, click the attachment.
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January 04, 2008
During the first week of the year, the US hiring slowdown raised concern that the US economic weakness will spread globally. Oil pierced $100, but closed the week below $98. The already-worried equity markets declined further; the already recession-certain government bond markets rallied further. Credit spreads widened. To read the full Economic Comments for the week ending January 4, click the attachment.
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December 31, 2007
Economic data was weaker especially concerning the US housing market this past holiday-shortened week. Bond yields and equity prices were lower in the US, but mixed elsewhere. Oil finished the year in the mid-90’s. Holiday Sales seemed to have had a good start, poor follow-through, and strong final surge. Much of the strength appeared to be price-driven. In the coming weeks we will determine whether the final surge was sufficient to save this season from being the weakest in five years. To read the full Economic Comments for the week ending December 31, click the attachment.
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December 21, 2007
Economic data was mixed, but Central Bankers were actively engaged in dealing with the current financial crisis. The result was mostly positive returns for both stocks and bonds. Credit spreads traded in a narrow band. Oil closed above $93 a barrel. The holiday-shortened week has few significant economic releases. Trading should be light as most portfolio managers have done what they needed to do for the year. The next reports of importance will be the December Employment Report, the Purchasing Manger’s Indices, and the reports of Holiday spending. To read the full Economic Comments for the week ending December 21, click the attachment.
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December 14, 2007
Economic data on growth was firmer than expected this week, but disappointment in US Fed inaction and increases in inflationary measures weighed on the capital markets. Oil prices re-pierced $90 to close at $91.27. Equity and Bond markets were lower. To read the full Economic Comments for the week ending December 14, click the attachment.
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December 07, 2007
Economic data was soft, but not falling apart this week. The Bush administration forged a deal to freeze some of the mortgage rates of some adjustable rate sub-prime mortgages with mixed reception. Oil traded below $90 for most of the week and closed at $88.28. Equity markets were mostly higher; government bond markets were mostly lower on the week. CDS spreads narrowed, but corporate bond spreads widened. To read the full Economic Comments for the week ending December 7, click the attachment.
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November 30, 2007
Softer economic numbers and encouraging indications from the US Fed gave stocks a late-week rally. Oil retreated below $90. Bond markets were higher in the US, but lower in Europe. Prospects of Fed easing gave some relief to credit spreads. To read the full Economic Comments for the week ending November 30, click the attachment.
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November 23, 2007
In the shortened Thanksgiving Holiday week in the US, investors had little to be thankful for. Central Bankers signaled reticence on further rate cuts, worrying investors that they may be behind the curve on staving off recession. Early indications of shopping activity on Friday spurred a rally, which was not sufficient to overcome losses from earlier in the week. Oil knocked on the $100 door, but closed just over $98 a barrel. Bond rallied on softness and heightened expectations for recession. To read the full Economic Comments for the week ending November 23, click the attachment.
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November 16, 2007
Credit concerns, not economic data drove the capital markets. Higher energy costs were reflected in the inflation measures, but the core data remained contained. Conflicting expectations about whether the sub-prime demise will push the US into recession and the accompanying Fed reactions caused more volatility in the markets than reflected in the mild week-over-week changes. Equity and Government bond markets were slightly higher in the US, but mixed elsewhere. Oil closed the week below $94. To read the full Economic Comments for the week ending November 16, click the attachment.
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November 09, 2007
Economic releases were mostly softer, but they were not driving the capital markets this week. The spread of the sub-prime credit demise coupled with Chairman Bernanke’s testimony, which failed to signal further rate cuts, drove stocks down and Government bonds up. Credit spreads blew through recent record “wides”. The dollar collapsed to reach new record lows against the Euro and Pound. Oil remained in the mid-90’s threatening to pierce the psychological $100 ceiling. To read the full Economic Comments for the week ending November 9, click the attachment.
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November 02, 2007
This week was filled with contrasting economic reports and releases. The Fed eased 25 basis points, but indicated that this ease should be enough unless the economy deteriorated more than already expected. While some of the economic data was surprisingly strong, renewed sub-prime concern erupted with additional write-offs and the removal of another top financial institution executive with expectations of more to come. Credit spreads widened with the expanded impact of the sub-prime demise. Stocks and bonds ended up mixed. Oil ended over $95. To read the full Economic Comments for the week ending November 2, click the attachment.
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October 26, 2007
Most of the economic data was softer this past week. Nonetheless, technology-sector corporate earnings and increased expectations of US Fed easing next week boosted stock prices on the week. Oil hit a record $92 a barrel this week as the US turned up the political and economic pressure on Iran. To read the full Economic Comments for the week ending October 26, click the attachment.
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October 19, 2007
This week’s economic data and the corporate earnings were softer. Heightened concern for viability of SIV’s (Special Investment Vehicles) weighed heavily on the markets. Stocks experienced significant losses; Government Bonds rallied, but widening spreads caused corporate credits to lag. The dollar fell against other currencies and oil closed at $88.60 on worry about a possible Turkish invasion of Iraq. To read the full Economic Comments for the week ending October 19, click the attachment.
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October 12, 2007
This week’s economic data demonstrated resilience of the economy and containment in the core components of inflation. Stronger economic data and the FOMC September meeting minutes reduced expectations that the US economy would slip into recession. Equities rose for the fifth week in a row; bonds fell. Oil prices rose on turmoil in Northern Iraq and closed over $83 a barrel. Credit remained on the narrower side of the recent range. The Investment Grade Index closed at a spread of 47 basis points while the High Yield Index closed at 359 bps.To read the full Economic Comments for the week ending October 12, click the at |