Posts Tagged ‘Dow Jones Industrial Average’

If you like your news with a twist of misery and a slice of disaster thrown in, then apologies, you will be disappointed with the latest economic data coming out of the US. On the other hand, if you like to be cheered up, read on.

The latest batch of good news out of the US came in a set of three.

Firstly US consumer confidence, according to the closely watched Conference Board Index, hit a near five and a half year high in June, with the index hitting 81.4. The last time it was higher was January 2008.

Okay, admittedly the data used to draw up the index only goes up to Mid-June, and stock markets crashed after that. But then again, bear in mind that US consumer confidence is one of the drivers of the US stock market. Some might say that US consumer confidence is riding high because the Dow and S&P 500 recently hit new all-time highs, but you could respond by saying yes, but part of the reason for stock market strength has been buoyant US consumer confidence.

But don’t forget that there are reasons beyond surging stocks for US consumers to feel chuffed with themselves at present. For one thing, as pointed out here several times of late, US household debt to income has fallen sharply since 2007.

Then there is US house prices. They have been looking up lately too, and that is also good for US consumer confidence. Bear in mind, too, that US house prices to rent and income are now below the historical average, so there is a good fundamental reason for prices to rise.

And that brings us to good news item number two. According to the latest Case Shiller US house prices index, April saw prices rise by 12.1 per cent year on year, and by 2.5 per cent over March. In fact, the month on month rise was the highest ever reported in the 12 year history of the index

And if that isn’t enough reason for cheer, yesterday also saw data on US durable orders for May, and that too was up.

Actually, it was literally up, with sales of aircraft soaring 51 per cent – Boeing sold 252 planes in the month, compared to 51 in April.

Even stripping out transport goods, core durables’ orders increased by 0.7 per cent month on month.

Apologies again. It is fun to be cynical, and talk about the Fed squashing the world by ending QE.

And indeed, if rates are set to rise, this will be a problem for some countries.

But relative to what we have become used to, the news out of the US really has been encouraging of late, and, just for now, cast cynicism aside and enjoy the moment.

© Investment & Business News 2013

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In the UK, as this piece shows (see: Is the UK housing market poised for recovery, and is that good or bad news?), there is evidence to suggest that UK house prices are in strong recovery mode. It is quite curious. The UK economy has suffered its worst downturn ever recorded. The FTSE 100 still languishes some 586 points below its all-time high set on December 30 1999 and some 377 points off the century high set in 2007.

The asking prices of average UK homes may be approaching an all-time high, but neither stock markets nor the economy are close to replicating that feat.

In contrast, the US housing market suffered one mother of a crash in 2006/07/08. It does appear the market has hit bottom, and is now in slow recovery mode. But that is the best we can say. US house prices are nowhere near what they were at their peak, and it will probably take years before they are.

At the time of writing (7.30 GMT 16 April) however, the Dow – even after yesterday’s falls – sits 435 points above its 2007 peak, a level that was its all-time high until a few week ago. The index is 11722 above its January 2000 high, which for much of the noughties was its all-time high.

So let’s run that past you again. The FTSE 100 peaked at the end of 1999; the Dow a couple of weeks later. At the time of writing, the FTSE 100 is 8.4 per cent below its 1999 level, while the Dow is 24.5 per cent up on its 2000 high. House prices, on the other hand, are approaching their pre-recession high in the UK, but are way below peak in the US. GDP in the UK is languishing at almost 3 per cent below the prerecession peak. GDP in the US surged past the pre-recession peak a couple of years ago.

The UK’s strategy may have won friends with a property obsessed electorate. The US experience instead has just created more production.

The US model may well create more sustainable growth. But the UK model creates votes in elections. Mr Osborne may try to present the veneer of a man making tough, unpopular but necessary decisions, which will create long term benefits. In reality, he is bribing the electorate with the promise of rising house prices, and in the process putting short term and transient benefits before long term resilience.

©2013 Investment and Business News.

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The data out of the US on Friday was a tad worrisome. In fact, at one stage during the day it looked as if US markets were in for something of a collapse, although the Dow finished Friday less than 0.1 points down on the day before – at 14865.06 from 14865.14 on Friday.

Two significant pieces of data on the US economy were published on Friday, and neither was good.

First there was the US Consumer Confidence Index, published by the University of Michigan. This fell to a nine month low. The Conference Board measure will be out at the end of this month, and if this supports the findings of the University of Michigan that will be a blow.

Secondly, US retail sales saw a 0.4 per cent month on month fall in March. Especially worrying was that discretionary items, such as sales of electronics, saw an particularly sharp fall.

What with disappointing jobs data out on the Friday before last, (88,000 increase in non-farm payrolls, the smallest rise since June Last year), and purchasing managers’ indices for both US manufacturing and non-manufacturing down on the previous month, the runes seem to point to a downturn Stateside.

Mind you, all that woe was not enough to stop the Dow and S&P hitting all-time highs last week, and Friday’s close was below that peak by the tiniest of margins.

Chris Williamson at Markit said: “The concern is that growth could slow again in the second quarter. There are suggestions that the downturn in March could have been caused by temporary factors such as the timing of Easter and cold weather, but the fact that consumer confidence fell markedly during the month suggests otherwise, and that instead there is an underlying weakening of demand occurring.

“This weakness is possibly linked to increased payroll and income tax hikes which took effect at the start of the year, and will inevitably add to worries that the US economy is slowing as we move into the spring as automatic budget spending cuts come into force. With this in mind, the Fed will be more cautious about sending signals that it is preparing to ease back on policy stimulus. “

©2013 Investment and Business News.

Investment and Business News is a succinct, sometimes amusing often thought provoking and always informative email newsletter. Our readers say they look forward to receiving it, and so will you. Sign-up here

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The Dow Jones finished yesterday with a new all-time high closing price with a reading of 14,673. During the day it hit an inter day high of 14,716.

To be frank, the rise was too small to give a specific reason. Once the Dow hits an all-time high, it only needs to rise by a fraction of one point to hit a new high.

The overall trend is more interesting. So far this year, the Dow Jones is up 1,569, or by 12 per cent. The year started with lots of euphoria as US jobs improved. US consumer confidence played with a five year high, data from Germany and China suggested a pick-up, and a general feeling that the Eurozone was past its worst dominated sentiment.

Frankly, a lot of those reasons are now gone. The latest jobs report from the US was disappointing, US consumer confidence has fallen sharply, the German recovery appears to have slowed, and news out of China is ambiguous. As for the Eurozone, well: oh dear!

Yet still the markets rise. Part of the explanation is that corporate results continue to belie economic performance. A bigger explanation might be that the markets have given the thumbs up to Japan.

At last, or so they say, Japan is doing the right thing. Nobel Laureate Paul Krugman has described the latest moves out of Japan as very good news.

As for the rest of the markets: the FTSE 100 ended yesterday at 6313, up 36 points on the day before, and up 0.07 per cent so far this year. In Germany the DAX closed at 7637, down 25 points but up by just 0.3 per cent this year – that makes sense. As for Japan, the Nikkei 250 closed at 13,192. It saw modest falls on the day before but so far this year is up a very impressive 27 per cent.

That may just about say it all: Japan up 27 per cent so far this year, Germany flat.

©2013 Investment and Business News.

Investment and Business News is a succinct, sometimes amusing often thought provoking and always informative email newsletter. Our readers say they look forward to receiving it, and so will you. Sign-up here