New Developments Abroad: Sharp Declines in French and Italian Industrial Output
July 10, 2008
The dollar rose 0.5% against the yen, 0.4% against the Swiss franc and sterling, and 0.2% against the euro and Canadian dollar. But the buck is off 0.3% relative to the Australian dollar. Australian jobs expanded 29.8K in June, three times forecast, and the jobless rates dipped to 4.2% from 4.3%. An IMF report on Australia urged vigilance against inflation and warned that growth might not slow as much as the Reserve Bank of Australia assumes.
European equities are lower: Dax -0.9%, Cac40 and Ftse each off 1.6%. In Asia, the Nikkei closed up 01%, but stocks in Australia and China fell by 1.5% and 1.4%.
The ten-year JGB yield fell 3.5 basis points to a 2-month low of 1.575% on financial market jitters. Sovereign bond yields also slid in Europe and Australia.
Oil dipped 0.2% to $135.78/barrel. Gold firmed 0.3% to $931.80/ounce.
In May, industrial production plunged by 2.6% in France (+0.7% y/y) and 1.4% in Italy (-4.1% y/y). On Monday, Germany reported a 2.4% decline.
The Bank of Korea kept its 5.0% interest rate unchanged but hinted strongly it may raise rates. There was further heavy intervention support for the won.
China’s $21.35 billion trade surplus in June was somewhat smaller than forecast. Both exports (17.6%) and imports (31%) grew less rapidly than assumed. Car sales climbed 15.4% y/y in June, down from 18.5% in 1H08, 21.7% in 2007, and 30% in 2006.
On-year economic growth in Singapore plunged from 6.9% in 1Q08 to 1.9%, a 5-year low, in 2Q08.
June CPI inflation in Denmark (3.8% y/y, a 24-year high) and Sweden +0.5% m/m and 4.3% y/y) exceeded expectations. In contrast, Norway’s core CPI was unchanged m/m and up by 2.4% y/y compared to forecasts of 2.5%.
Britain’s Halifax house price index fell 2.0% m/m in June, twice as much as expected, depressing the 12-month decline to 6.1% from -3.8% in May and -0.9% in April. This index had risen 10.7% in the year to June 2007.
Consumer price inflation in Egypt rose to 20.7% y/y in June from 19.7% in May.
Expected inflation in Australia held at a 15-year high in June of 5.9%, which is well above the latest actual CPI reading of 4.2% y/y.
Japanese corporate goods price inflation, a replacement for the old WPI, rose to 5.6% y/y in June from 4.8% in May and 2.7% at end-2007. 5.6% constitutes a 27-year high. Japan’s current account slid 5.9% y/y in May to Y 2001 bln. The trade surplus was 6.3% higher than a year before. In seasonally adjusted terms the current account surplus widened to Y 2033 bln from Y 1511 bln in May. Stock and bond transactions generated a Y 1684 bln outflow in June but a Y 102 bln inflow in the week to July 5th.
As expected, the Bank of England benchmark rate was kept at 5.0%.
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