New Developments Abroad

May 23, 2008

The dollar fell 0.5% against the yen and Aussie dollar. It’s down 0.2% against the Swissy and -0.1% relative to the kiwi but unchanged against the euro, sterling and yuan.

Bond yields are sharply higher on inflation fears. Ten-year JGB yields hit a 9 month high and is up 4.5 bps net at 1.695%. Asian stocks are lower: Chinese CSI 300 -1.0% and Hang Seng -1.3%. But the Nikke firmed 0.2%. In Europe, the Dax (-0.4%) and Ftse (-0.5%) are trading lower.

Oil recovered 0.9% to $132.04/bbl after sharp profit-taking on Thursday. Gold is up 0.4%.

Euroland’s Flash PMI estimates for May show slowdown of growth to a trickle. Composite PMI was 1.1, down from April’s 51.9, as manufacturing stayed low at 50.5 after 50.7 and services slumped to 50.6 from 52.0 in April. Lowest composite score since July 2003 and below expectation of 51.6 reading.

German Composite PMI held at 55.1. Factory index at 53.5 after 55.1. Services fell to 53.7 from 54.9. French composite PMI dropped to 51.3 from 52.9 with 51.3 score in manufacturing and 50.7 score in services.

Italian real GDP expanded 0.4% last quarter, double street forecasts, but on-year growth was just 0.2% after 0.1% in 4Q07.

French consumer spending sank 0.8% in April following a revised 1.0% decline in March. Such was much weaker than anticipated and resulted in a 12-month increase of just 0.4%.

British real GDP growth in 1Q08 was unrevised at +0.4% versus 4Q and 2.5% against 1Q07. Growth was led by consumption (1.3%) and government spending (1.0%). Production fell 0.2%, and service sector growth was revised downward to 0.5%.

The Bank of Canada Governor, Carney, said higher commodity prices would have to be considered in guiding future monetary policy, a hint that less ease may be coming than suggested heretofore.

BOJ minutes from the early-April meeting reflect mounting concern that expected inflation of consumers is rising.

Chinese equities had their worst performance in five weeks.

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