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It seems the only way is down for the dollar.
Yesterday brought a raft of miserable economic news across the Atlantic. And fears that durable goods orders data (that's goods which are meant to last for several years) will be equally poor later today, sent the greenback to a fresh record low against the euro for the fifth day in a row.
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And the US isn't even in a recession yet
The bad news for the US economy came thick and fast yesterday. The International Council of Shopping Centers reported that retail sales fell 1% overall last week. As for specific stores, Target, America's second-biggest discount chain cut its forecasts for September sales. It reckons same-store sales for September will rise 1.5% to 2.5%, rather than the 4-6% it had previously expected. Meanwhile, Lowe's, the second-largest DIY group warned that profits this year might not be up to Wall Street's expectations.
As for the housing market, there's no sign of any improvement there either. The S&P/Case-Shiller housing index reported that house prices in 20 US cities fell by an average of 3.9% year-on-year. The index, which began in 2001, fell on an annual basis in January for the first time, and has fallen every month since. Fifteen of the 20 cities saw declines, with the largest in Detroit, where prices fell 9.7%. Life in Seattle clearly isn't as grim - prices there rose by 6.9%.
Lennar, the largest US house builder, made a loss of $513.9m in its third quarter as it was forced to write down the value of its stock. That's the biggest loss ever in its 53-year history. The group made $206.7m at the same time last year. Revenues fell by 44% to $2.34bn. "Heavy discounting by builders, and now the existing home market as well, has continued to drive pricing down," said chief executive Stuart Miller.
Amid all the gloom, its little surprise that consumer confidence has taken a hammering, falling by more than analysts expected, to the lowest level in nearly two years. Fears for job prospects were prominent among the reasons for the decline.
"Consumers have been whipped back and forth like crazy," said Kurt Barnard of US group Retail Forecasting to Bloomberg. "Money has become a commodity to be treasured."
It's been a long time since anyone's been able to say that about money. At the start of this year, the talk was still of abundant liquidity and free and easy lending. It's amazing how quickly things can change.
That's something that Australian wheat farmers know all about. The wheat harvest Down Under looks like it could be even worse than previously expected. Only a week or so ago, the government slashed its wheat harvest forecast by 31% to 15.5m tonnes due to drought conditions, from the June forecast of 22.5m tonnes.
In that short time, the situation has deteriorated further. Ron Greentree, the country's largest grain grower, told Bloomberg that he could end up gathering as little as 10% of his usual crop this year. "The crops are past the point of no return, even with rain it's desperate." He and other commodity experts reckon the harvest may be as low as 12 to 13 tonnes.
This comes at a time when global inventories are heading for a 26-year low, while developing markets and pressure from biofuels means demand on crops is higher than ever before.
If you're interested in playing the wheat price, you can take a look at www.etfsecurities.com. Or for shares that might be worth a look, see our most recent cover story on soft commodities, here: Buy a farm - or agricultural stocks
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Turning to the wider markets
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Miners led London's benchmark FTSE 100 into the red yesterday as investors took profits on Monday's gains. The index ended the day 69 points lower, at 6,396, although a late rally saw it pull back from intraday lows. Mortgage banks Northern Rock, Alliance & Leicester and Bradford and Bingley were also lower again. For a full market report, see: London market close
On the Continent, the Paris CAC-40 was 50 points lower, at 5,641, and the Frankfurt DAX-30 was down 50 points, at 5,641.
On Wall Street, stocks closed mixed. The Dow Jones was up 19 points to end the day at 13,778. And the tech-heavy Nasdaq added 15 points to close at 2,683 as the likes on Microsoft and Apple made good gains. Meanwhile, the S&P 500 was a fraction of a point lower, at 1,517.
In Asia, the banking sector led the Japanese Nikkei 225 up 34 points to a close of 16,435. However, in Hong Kong the Hang Seng was down 121 points, at 26,430.
Having fallen by $1.42 yesterday, crude oil futures had edged up to $79.85 this morning, whilst Brent spot was at $76.78 in London.
Spot gold had edged up to $731.20 this morning, having fallen to $730.40 in New York late last night. Silver, meanwhile, was steady at $13.43.
In the currency markets, the pound was at 2.0145 against the dollar and 1.4260 against the euro. And the dollar was at 0.7078 against the euro and 115.09 against the Japanese yen.
And in London this morning, maker of Cathedral City cheddar and Petit Filous yoghurts Dairy Crest announced in-line H1 profits. The company also said that it would raise prices due to the 'considerable' increase in milk prices. Dairy Crest is currently under investigation, along with other dairy producers, over allegations of collusion with supermarkets to fix dairy prices. Its shares were down by as much as 1.5% in early trading.
And our recommended articles for today...
Are we heading for Peak Food?
- The rising prices of soft commodities can't be ignored. For another take on this investment trend, read Whiskey and Gunpowder's Kevin Kerr on the troubles currently facing the Midwest's grain producers - and his food price predictions - here: Are we heading for Peak Food?
Five ways to cut the cost of investing
- Investors can spend hours devising grand investment strategies only to lose out on the day-to-day costs of investing. For Tim Bennett's top tips to reduce unnecessarily wasting money, click here: Five ways to cut the cost of investing
John is the executive editor of MoneyWeek and writes our daily investment email, Money Morning. John graduated from Strathclyde University with a degree in psychology in 1996 and has always been fascinated by the gap between the way the market works in theory and the way it works in practice, and by how our deep-rooted instincts work against our best interests as investors.
He started out in journalism by writing articles about the specific business challenges facing family firms. In 2003, he took a job on the finance desk of Teletext, where he spent two years covering the markets and breaking financial news. John joined MoneyWeek in 2005.
His work has been published in Families in Business, Shares magazine, Spear's Magazine, The Sunday Times, and The Spectator among others. He has also appeared as an expert commentator on BBC Radio 4's Today programme, BBC Radio Scotland, Newsnight, Daily Politics and Bloomberg. His first book, on contrarian investing, The Sceptical Investor, was released in March 2019. You can follow John on Twitter at @john_stepek.
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