New Developments Abroad

May 12, 2008

The U.S. dollar firmed 0.9% against the yen, 0.6% versus the Swissy, 0.2% against the euro and 0.1% against the C-dollar. The dollar lost 0.2% against sterling and 0.1% against the A-dollar.

Sovereign bond yields are higher. 10-year JGB yield climbed 4.5 bps to 1.6%.

Most equities are up: Nikkei +0.6%. Australia +1.0%. Dax +0.5%. Ftse +0.7%. CSI300 +0.7%. But Hang Seng (-1.5%) and Kospi (-1.3%) declined.

Oil is off 0.5% but still very elevated at $125.37/bbl. Gold retreated 0.4% to $882.60/oz.

Thousands have died in a 7.8 earthquake in southwest China.

British producer prices soared in April. The PPI-O advanced 1.4% m/m and 7.5% y/y, the biggest 12-month increase in at least 22 years. Core +1.0% m/m, 3 times greater than forecast. Energy +2.3% m/m and +25.4% y/y. Food +1.1% m/m and 7.8% y/y. PPI-I +2.4% m/m and 23.3% y/y, most since 1980. These results cast doubt on the likelihood of a rate cut next month.

Britain’s trade deficit (goods and services) narrowed slightly to Gbp 4.03 bln in March from Gbp 4.33 bln in February. The goods deficit alone was at Gbp 7.44 bln.

Chinese consumer price inflation accelerated to 8.5% in April from 8.3%. In response, China’s central bank raised reserve requirements to 16.5% from 16.0%. This was the fourth increase in 2008; however, so far there have been no increases in benchmark interest rates. China also reported a reduced 10.8% on-year advance in car sales. All motor vehicle sales went up 14.1%.

Australian business sentiment slipped to -8 in April from -4. Business conditions remained at +7 but down from a peak of +20 in October 2006.

Italian industrial production dipped 0.2% for a second straight month in March. Output fell 7.4% y/y and dropped by 2.5% adjusted for variations in the number of working days.

The Japanese Economy Watchers’ Index fell to 35.5 in April from 36.9 in March. Japanese M2+CD money expanded by only 1.9% y/y in the year to April, down from 2.2% y/y in 1Q. Bank lending slid 0.2% y/y but rose 1.2% incluing Shinkin banks (credit unions). Corporate bankrupticies rose 8.4% y/y in April. Stock and bond transactions with non-residents generated a Y 438 bln outflow in the week to May 3rd.

Industrial production growth in India slowed sharply to 3.0% in March, a six-year low, from 8.6% in February.

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