The Housewives That Move Markets

Rob Mackrill - Thu 17 Jan, 2008

Who has the clout to move a market? Central banks...investment banks...hedge funds...housewives... Housewives!? Well, on occasion... Last summer reports speculated on the behaviour of the archetypal Japanese housewife Mrs Watanabe as to the future course of the yen carry trade. In case you missed it, the yen carry trade is - or was - the business of selling yen and reinvesting the proceeds in the likes of US and New Zealand dollar-denominated government bonds which paid considerably more interest than the 0.5% on offer at home in Japan...

Who has the clout to move a market?

Central banks...investment banks...hedge funds...housewives...

Housewives!? Well, on occasion...

Last summer reports speculated on the behaviour of the archetypal Japanese housewife “Mrs Watanabe” as to the future course of the yen carry trade. In case you missed it, the yen carry trade is - or was - the business of selling yen and reinvesting the proceeds in the likes of US and New Zealand dollar-denominated government bonds which paid considerably more interest than the 0.5% on offer at home in Japan.

Mrs Watanabe controls the household purse strings in Japan and was assumed to hunt relentlessly for better yielding opportunities for the family savings. She usually found them abroad. So she sold her yen and bought bonds in currencies such as US and New Zealand dollars. So many Watanabes were doing this it became a very significant business, depressing the yen and boosting the recipient currencies. The Economist estimated they accounted for 30% of Tokyo’s forex market in 2007.

With such a slice of the market they were a force to be reckoned with. Trying to second guess their intentions became a key question for currency strategists trying to figure out where the yen was headed. Would they continue buying up overseas treasuries and selling the yen? Or would they unwind their positions, repatriate the cash and boost the yen? The one year chart against the pound suggests the Watanabes have headed home. Not that the pound hasn’t had a fair bit to do with its appreciation...near 6% current account deficit, a budget deficit, house price and credit booms...and a nationalised bank to be added to the public sector debt, perhaps?

Today, it’s the Indian housewife that makes the news. Are they calling the tune in the gold market, wonders an FT report...?

India is the world’s largest consumer and India’s householders are “value-savvy” on the subject. Right now they’re sellers.

“Demand for gold is virtually zero,” Suresh Hundia, president of the Bombay Bullion Association tells the FT, and imports have also slumped.

If they’re calling the top it’s a short-term call, counters Jill Leyland, chief economist at the World Gold Council: “The Indian housewife would be cautious at the moment, waiting for prices to settle before returning to the market.”

Having hit $914, gold has pulled back to $882 this morning so the Indian housewives look to have got their timing about right. Though they might soon regret it, says M005e. The gold chart is still looking bullish he reckons. Either way, the world’s housewives are not to be dismissed lightly on this occasion. Lest we forget, they had a formidable champion in Margaret Thatcher, and it was the cake-baking WI that gave Tony Blair one of the roughest rides of his premiership when he dared to play politics at their conference in 2000.

*** More retailers reporting today, giving us another window on consumer spending...

Good news from the likes of back-from-the-dead retailer HMV (“sees no slowdown in sales”) and Argos owner the Home Retail Group. But Home Retail’s chief executive Terry Duddy sounds a word of caution looking ahead:

"Looking forward, the anticipated consumer slowdown is now more evident and it is obvious that sales growth in the short-term will be harder to come by."

Electrical retailer Kesa, which owns Comet in the UK, had a better Christmas than Currys’ owner, DSG International. Sales rose 1.7% as people customers came looking for laptops and flat screen TVs.

And housebuilder Barratt Developments bucked the gloom in the sector as it topped forecasts at the half year stage. Chief executive Mark Clare says it’s too early to call the market and is looking for a cut in interest rates to help boost the traditionally strong spring selling season. The shares have bounced on the news but the business is valued at less than its debt notes The Times.

As for the broader markets...so much for the support levels I mentioned yesterday. The FTSE, Dow and S&P500 all closed below them. The index charts are breaking downwards and still giving bearish readings, says M005e in his latest update today...but sees value for diligent stockpickers. 

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