First on the containment of the U.S mortgage meltdown, General Motors (GM) CEO Rick Wagoner said that auto sales would be impacted by the housing market whilst the biggest U.S home mortgage lender Countrywide Financial (CFC) said that tighter regulations would lead to an increase in foreclosures. Remember boys and girls this is just the beginning.
On the earnings front in the U.S with less than 25% of companies having reported so far 1Q07 earnings for the S&P 1500 (comprising of the S&P 500, S&P Midcap 400 and S&P Smallcap 600) has been tracking around 4.3%, quite a drop from the 14.1% registered in 4Q06. Earnings have been weighed down by financials and semi-conductors however the earnings growth rate is tipped to improve as more reports come in.
Some very benign inflation figures out of Australia today put a real dampener on an interest rate rise at the next RBA meeting in May. The Australian economy posted it’s lowest annual inflation rate for three years rising just 0.1% in the March quarter for an annual rate of 2.4%.That all but knocks on the head an interest rise in May and puts one off at least until July but may even signal the end of rate rises for the year. It will be interesting to see if this slowdown is more than just a blip on the radar in the coming months. I suspect it will be and besides, since I earn most of my money in yen it wouldn’t hurt to squash expectations of an Aussie rate rise.