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Weekly Currencies
The U.K. posted a favorable jobs report on Wednesday, showing a total of 31.69 million jobs, the most since records began in 1959. However, nerves were tested on Friday when the Bank of England said that it made an emergency loan to Northern Rock, the U.K.'s fifth largest mortgage lender. The Bank of England has maintained a stricter response to the subprime problems than either Europe or the U.S. and Friday's big drop in the pound hinted at the consequences of that policy. The December pound closed the week down 2.22 cents at $2.0049.
It was a tough week for the yen. On Monday, Japan's Cabinet Office reported that the economy contracted .3% in the second quarter of 2007, much worse than anticipated. Then on Wednesday, Prime Minister Shinzo Abe unexpectedly resigned from office and checked himself into a hospital for stress-related illness. The ruling Liberal Democratic Party will hold an election on September 19th to choose the next Prime Minister. In the meantime, the December yen finished the week down .0157 at .8784.
Australia is one economy that has slipped by most of the recent financial problems unharmed. The International Monetary Fund said on Thursday that they expect Australia's real GDP to increase 4.4% in the fiscal year that ends on June 30, 2008. The December Australian dollar climbed 1.62 cents to 84.02.
This week's China Watch showed that in August, consumer prices were at their highest level in 11 years, retail sales were up 17.1% from a year ago, and industrial production slowed slightly, to a 17.5% annual gain. On Friday, the People's Bank raised the one-year lending rate from 7.02% to 7.29%, the highest in nine years and the fifth increase this year. The government has also increased banks' reserve requirements seven times this year.
Weekly US Economy
Disappointment from last week's weak unemployment report hung over the markets again this week and Friday's report that August retail sales without autos were down .3% did not help. On the positive side, the University of Michigan's consumer sentiment index did improve slightly in September. The December U.S. dollar index was down .265 to 79.46, the lowest spot close in 15 years. The December S&P 500 gained 25.60 to 1,498.00 with high hopes for a federal funds rate cut on Tuesday.
With little economic news out this week, the market did hear some interesting comments from interviews with former Federal Reserve Chairman Greenspan. Among the highlights, he said that he did not recognize a serious problem in the subprime mortgage market until 2005 and he also said that Fed Chairman Bernanke has made the same decisions that he would have made, were he still in office. The June eurodollars were down .165 at 95.60. The December U.S. T-bonds ended the week down 15/32nds at 112.27/32nds.
