New Developments Abroad

May 21, 2008

The dollar and sterling are again weaker. Dollar overnight losses ranged from 0.7% against the kiwi to 0.5% against the euro, 0.4% against the Swissy and A-dollar, 0.3% against the yen and C-dollar and 0.2% versus the yuan. Dollar gained 0.1% relative to the British pound.

Asian stocks closed mixed. Nikkei lost 1.7%. Kospi -1.4%. Australia -1.4%. But China +2.0% and Hong Kong up 1.2%. European equities are higher: Dax +0.3% and Ftse +0.9%.

10-year JGB yields lost 3.5 bps to 1.605%. Most sovereign bond yields are up, however.

Oil set another peak overnight and is up 0.6% at $129.74/bbl. Gold is 0.5% higher at $925/oz.

The German IFO business climate index unexpectedly rose to 103.5 in May from 102.4. Current conditions (up 1.7 points to 110.1) and expectations (+0.6 points to 97.3) each advanced.

Spanish growth of 0.3% (2.7% y/y) was lower than the Euroland average pace in 1Q08 for the first time since 1997. On-year growth represented a 5-1/2 year low.

Minutes of the Bank of England policy meeting on May 7-8 showed an 8-1 vote, with Blanchflower urging a 25-bp rate cut against majority that favored keeping a 5.0% rate. Majority feared that a cut would leave the impression that the Committee is targeting growth, not inflation and could therefore boost expected inflation. Within the majority, opinions differed on how much the property market slump will depress inflation in the medium term.

Obama and Clinton split Oregon and Kentucky, putting Obama very close to enough delegates to win. Obama won Oregon by 16% margin. Clinto took Kentucky by 35%.

Australian consumer confidence recovered 2.7% to 89.8 from April’s 178-month low of 87.4. Australian motor vehicle sales slid 0.8% in April but rose 5.5% y/y.

British M4 growth slowed from 11.9% in March to a 32-month low of 11.2% in April.

The U.K. fiscal surplus in April was smaller than expected. Gross mortgage lending reported by the British Council of Mortgage Lenders fell 7.7% y/y in April.

Canadian CPI data arrive at 11:00 GMT. FOMC minutes will be released today at 18:00 GMT.

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