July 30, 2010

Market Wrap: for the week ending July 30, 2010

• US GDP grew at an annual rate of 2.4% in the second quarter of 2010 (ESA)
• US Consumer sentiment plunged in July to its lowest level in 9 months (Reuters)
• Euro area unemployment rate remains at 10.0% (Eurostat)
• China overtakes Japan as No.2 economy in the world (Reuters)
• Euro area inflation is estimated at 1.7% in July, up from 1.4% in June (Eurostat)
• New Zealand's central bank hiked interest rates, lifting the cash rate to 3% (AP)
• Australia's CPI rose 0.6% in Q2 compared with a rise of 0.9% in Q1 of 2010 (WSJ)
• Germany's unemployment rate fell by 0.1% to 7.6% in July (Economy.com)
• The Reserve Bank of India raised interest rates by 25 basis points to 5.75% (Economist)
• US 30-year mortgage rates hit yet another low of 4.54% - lowest on record since 1971 (AP)
• US durable goods orders in June 2010 fell 1.0%, to $190.5 billion (ESA)
• Home vacancies rise as US ownership falls to 66.9% - lowest in decade (Bloomberg)
• BP reported a quarterly loss of $17bn, including a $32.2bn charge for the oil spill (AP)
• US consumer confidence for July fell to 50.4 (1985=100), down from 54.3 in June (AP)

Weekly Market Barometers    
stock-2010-0731   fx-2010-0731

Chart Of The Week
Working hard to have your own home - the American Dream - has been a driver for much of the economic growth in the past few decades.  When you own your home, “you have arrived”. That said, it is debatable how much home in terms of net equity is really owned by the US home owner.  The home ownership rate peaked in 2004 at 69% but it has since fallen to just under 67%.  The historic average since 1965 is about 65% – just under two thirds.  If this trend is in line with general tendencies to revert to the mean, we may be facing a few more years of declines in the home ownership rate.  Given the persistently high foreclosure rates and growing vacancy rates, the home ownership rate is in danger of slipping below the historic average.  Mortgage rates at historic lows have not made a significant impact on the housing market.  If rates were to rise at some point, would a two/thirds home ownership rate still be viable?


Recommended Read
Please consider: Three years on, the markets are masters again by Philip Stephens.  Here is a bit of a taste:

With a little help from the regulators, the big banks can now declare themselves duly stress-tested, but the systemic instabilities remain. International markets have moved far ahead of the capacity of political leaders to understand, let alone properly oversee them. This failure of political governance to keep pace with global economic integration is as apparent now as it was in 2007.

Even if politicians better recognise the risks of interdependence and the vulnerabilities of particular institutions and financial instruments, they are far from any consensus on how to share responsibility for global oversight. So, three years on, things are much as they were – except that most of us are poorer. The markets rule. OK?

Source: www.ft.com

Good luck and good investing!

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