The week ending April 06, 2012, closed with the S&P 500 down approximately .75% to 1397, the Dow Jones Industrial Average down approximately .97% to 1361, and the NASDAQ closes down .89% to 3081. The U.S. markets were closed Friday, April 06, which was the release date of the most recent jobs report indicating growth of open jobs in the economy.
Given the disappointing jobs number of 120,000 jobs added to the economy in March, earnings of major retailers have increased and consumers do continue to spend money. WTI essentially closed flat over the week to just over $104/bbl after spiking to a fraction over $105/bbl. Slowing inflation and low interest rates will enable the continue rebound of the U.S. housing market while providing a higher real discretionary income, leading to a higher savings rate.
As China is expected to ease credit, FDI into mainland China is expected to increase as the Chinese government is relaxing policy toward hedge funds seeking investor capital. Capital flows from U.S. equities to Asian Tiger economies including Frontier markets such as Vietnam is expected to increase. Interest rates on U.S. treasures continue to decline with the 10yr yield falling to 2.05% as U.S. debt is seen as a relatively safe asset for domestic and international banks to hold. Rising principals indicate investor outflows from bonds into higher yielding assets. Investors over the next week will be seeking to invest into emerging and frontier markets as well as checking commodity prices for allocation opportunities.
The AUD is expected to weaken against the USD, the EUR, and the JPY. Although the USD, EUR, and JPY are inherently weakening relative to their export markets, Australia is increasing exports to which their currency is now a function of global macro economic strategy. The broader markets and major industrial companies will report earnings starting April 9th. Although major retailers (leading indicator of broader economic health), major manufacturing indicates global demand for industrial production and signals the health of the U.S. economy on a more global level.
Enjoy your holiday weekend.
Vidia Ramdeen, CEO – Ricochet Alternative Asset Management