May 21, 2010

FXIS Market Wrap: for the week ending May 21, 2010

• US Senate approves sweeping Wall Street reform bill (Reuters)
• Number of banks on FDIC's "Problem List" rose to 775, from 702 at the end of '09 (FDIC)
• Shanghai's stock index is down more than 21% so far this year (Business Week)
• Germany's parliament approves Euro-zone rescue bill (WSJ)
• The Shanghai Composite Index is Asia’s worst-performing stock index so far this year (Economist)
• Dubai World has agreed with its main creditors to restructure $23.5B of debt (Bloomberg)
• The Leading Economic Index for Germany Increased 1.5% in March (Conference Board)
• FOMC members expect real GDP growth of between 3.2% and 3.7% (FOMC Minutes)
• The Leading Economic Index (LEI) for the US declined 0.1% percent in April (Conference Board)
• Oil futures traded at $68 the lowest intraday price since Sept. 30 (Bloomberg)
• On a seasonally adjusted basis, the US Consumer Price Index (CPI-U) declined 0.1% in April (BLS)
• Euro falls to a four-year low of $1.2145 against the US Dollar on Wednesday (WSJ)
• Germany announced a ban on naked short selling and naked CDS of EU government bonds (FT)
• US Producer Price Index declined 0.1% in April, seasonally adjusted (BLS)

Chart Of The Week

Prof. Robert Shiller has been tracking the cyclically adjusted price earnings ratio (CAPE) of the S&P 500 all the way back to the late 1900’s.  This ratio does not fare too well as an indicator of short-term market performance however, over a longer time horizon, it is a good assessment of whether stocks are priced relatively expensive or relatively cheap.  The S&P 500’s CAPE is currently about 19x.  Based on the typical mean reversion, the stock prices are currently about 20% above the long-term average of 16.36.  Stocks, on average, are still expensive despite the over 4% market drop this week.



Weekly Market Barometers    
Stock-2010-0521   FX-2010-0521

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