Weekly Wrap-Up June 29 - July 3, 1998

Closing Numbers

The North American bond markets were dominated by golf games and long weekends, as investors let the second quarter come to an uneventful close. An early close Tuesday and Canada Day holiday Wednesday in Canada, and an early close Thursday for the July 4th holiday Friday in the US left little reason for investors to come to the market. The Federal Reserve board met, had lunch, and went home leaving short-term interest rates unchanged. With the economic data indicating that the US is not experiencing anything like run-away inflation, the Fed held its ground. What a brave move! The Asian economic turmoil would only have been exacerbated if the Fed had raised rates as $US denominated assets would have looked even more appealing than they already do.

On the economic front there were a few numbers of note, but no one was around to care. In the US, new home sales rose 0.3% in May; NAPM was down 1.8 to 49.6 in May - the first reading below 50 in what seems like forever - noteworthy was the prices paid component continues to decline; construction spending dropped 1.5%; factory orders declined 1.6%; non-farm payrolls rose 205,000 jobs, with the headline unemployment figure increasing 0.2% to 4.5%, hourly earnings rose a muted 0.1%. In Canada, nothing noteworthy was released that would have caused the slightest ripple in the mill pond of a market this week.

The Canadian 30 year long bond finished a barn burner of a week 4 basis points to the good at 5.49%. The US 30 year Treasury bond chugged along a break neck speed shedding 3 basis points on the week to close at 5.60%. The Canada/US 30 year bond spread moved back into -11, one basis point further through the US on the week. (A basis point is 1/100th of a percent.)

The North American equity markets put on a brave face making the market look fairly strong in the face of thin, holiday inspired trading. No earnings warnings from the banks and high techs allowed the markets to move higher on no interest rate increase by the Fed. Trading was anaemic, leaving many traders wonder whether or not they could stick pencils into the ceiling tiles above their desks. Some optimism that the Japanese are attempting to make structural changes to their financial system also helped the market do better. With an election soon approaching look for the lip service to get quit deep and more than a little pungent.

The TSE closed a holiday shortened session up 45.05 points, or 0.61%, at 7383.71. BCE and bank stocks helped the most. In the US, the DJIA added 80.72 points, or 0.90%, to close the July 4th holiday stunted week at 9025.26. The close above 9000 is technically bullish for the markets. The S&P500 added 1.17%, while the Nasdaq was up 1.31% on the week.

Next week brings everyone back to their desks, but whether they have a reason to do anything is a mystery. There are no significant numbers until the end of the week, when PPI is released in the US. Don't hold your breath for a big jump in that number. The only other issue of note is the ongoing Asian situation and whether or not Japan has the resolve to stick to it's latest announced package. Again, don't hold your breath. Good trading.

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