New Developments Abroad
June 10, 2008
Strong overnight gains in the dollar amount to 1.5% against the Swiss franc, 0.9% versus sterling and the euro, 0.7% relative to the C-dollar, and 0.5% against the kiwi and yen. Latest impetus for appreciation came from a speech by Bernanke in which he promised that the Fed will strongly resist any surge in long term inflation expectations.
Asian stocks plunged 8.1% in China, 4.2% in Hong Kong, 2.5% in Taiwan 1.9% in South Korea, and 1.1% in Japan. In Europe, the Dax is off 0.7%, and the Ftse has fallen 0.4%. Paris Cac -0.9%.
Sovereign bond yields sharply higher. 10-year JGB hit a 10-month high of 1.82% and is 5 bps higher net at 1.775%. Oil little changed at $134.28/barrel after big drop yesterday. Gold is down by 1.3%.
Japanese core private domestic machinery orders rebounded 5.5% m/m in April after 8.3% drop in March. A 1.5% drop was expected. 12-month gain still only 0.5%. More weakness predicted ahead.
Two pieces of weak data were reported in Australia: housing finance fell 3.0% in April, and job ads slid 1.7% in May.
German wholesale prices shot up 1.4% m/m in May, lifting the 12-month increase from 6.9% in April to 8.1%, highest since February 1982.
The People’s Bank of China announced a 2-stage jump in reserve requirements of 50 bps each on June 15th and June 25th, reaching 17.5% from 16.5%. Vietnam’s central bank raised its benchmark 3-month rate by 200 basis points to 14%. In Egypt, consumer price inflation leaped to 19.7% y/y in May from 16.4% in April on higher commodity prices.
Swedish consumer prices went up 0.4% and 4.0% y/y in May, more than forecast. But in Norway, core CPI of 2.3% y/y in May was less than forecast.
Italian real GDP growth in 1Q08 was revised up a tenth to 0.5% (but just 0.3% y/y). Growth stemmed from net exports and is not likely to be sustained.
Industrial production in April was stronger than expected in France (+1.4% m/m and +2.1% y/y) and Italy (+0.7% m/m and +2.0% y/y).
Chinese car sales increased 15.6% y/y in May and by 17.4% y/y in January-May. Sources are claiming that on-year Chinese CPI inflation settled back to 7.7% in May from 8.5% in April on lower costs for fresh food.
British industrial output grew 0.2% m/m as well as y/y in April, which was more than forecast. The RICs house price balance remained depressed at -92.9 in March-May versus record low of minus 94.7 in Feb-April. Same-store BRC sales rose 1.9% y/y in May.
Consumer confidence in Indonesia weakened for a sixth straight month to 82.4 in May from 86.8 in April.
Analysts expect the Bank of Canada to announce one more 25-bp rate cut to 2.75% at 13:00 GMT today and then to pause monetary policy at that level.
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