New Developments Abroad
May 14, 2008
The dollar registered broad gains overnight except against the C-dollar. It rose 0.9% against the Aussie dollar after a soft Australian labor cost report and gained 0.5% against the kiwi and Swissy. It also rose 0.4% relative to the yen and by 0.3% against sterling and the euro.
Bond yields are sharply higher. 10-year JGB yields leaped 12.5 bp to 1.705%.
The Nikkei gained 1.2%. China’s CSI 300 jumped 3.2%. Aussie stocks +1.0%. But the Dax eased 0.1%, and the Ftse is unchanged.
Oil is 0.2% lower at $125.50/bbl. Gold fell by 0.7% to $863.40.
The Bank of England quarterly inflation report predicts CPI inflation remaining above 3.0% for several quarters and at 2.25% versus 2.0% target in two years’ time if there is further monetary easing. Alternatively, the CPI would be marginally less than 2% if rates are not cut further. Growth is seen slowing to 1.0% by 4Q08 but recovering to 2.35% in two years. A recession is possible. Governor King spoke about a challenging balancing act for policymakers.
British average earnings growth accelerated to 4.0% y/y in 1Q08 from 3.7% in Dec-Feb. 4.7% jump in the year to March was the greatest gain in 14 months. Unemployment (claimant count) increased by 7.2K in April, the biggest rise in two years and third gain in a row. ILO jobless rate held steady at 5.2%.
Ezone industrial production dipped 0.2% in March despite a 2.7% increase in energy output. Most pronounced weakness was seen in consumer goods. Production still posted a rise of 3.0% saar in 1Q08. March-over-March increase of 2.0% was down from 3.2% y/y in February.
The leading economic index for the OECD fell to 98.1 in March from 98.6 in February.
Australian hourly wages climbed 0.9% in 1Q08 (4.1% y/y), down from 1.1% in 4Q07. Another 1.1% advance had been anticipated. The smaller rise removes some urgency from any inclination that policymakers might have to tighten further soon.
Japanese corporate goods prices rose 0.6% in April, the same monthly increase as in March, and by 3.7% y/y. The CGPI will accelerate in May due to reimposition of a gasoline tax.
Japan’s current account fell 12.3% y/y in March to Y 2.88 tln but increased 16.1% in fiscal 2007 to Y 24.55 tln. Merchandise imports increased 13.2% y/y in March, much more than the 2.8% rise in exports. Net portfolio investment outflows amounted to Y 10.7 tln in March compared to Y 8.86 tln in March 2007. Stock and bond transactions in April generated a Y 1.95 tln net inflow.
Chinese industrial production growth slowed to 15.7% y/y in April from 17.8% in March but was similar to the rise of 15.4% in January-February.
The French finance minister said EUR/USD at $1.55 is still 20% overvalued.
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