New Developments Abroad
May 6, 2008
The dollar is down 0.4% against the kiwi and Swiss franc but otherwise little changed.
Oil spiked overnight to a new record high of $120.93/bbl but settled back to a net dip of 0.1% to $119.88/barrel. A Goldman Sachs research study predicts oil will climb above $150/bbl amid supply constraints within two years. Gold is 0.7% higher at $880.20/bbl. Compared to oil and in light of more optimism about the United States, gold below $900 looks cheap.
Japan remained closed for the final day of the Golden Week holidays. In Europe, the Dax (off 0.5%) and Ftse (-0.4%) are lower. In Asia earlier, the kospi (0.6%) and Hang Seng (+0.3%) closed higher, but China’s CSI 300 gave back 1.1%.
The Reserve Bank of Australia made no change to its 7.25% cash rate. No surprise there. A released statement implies no rate change will be made anytime soon. The central bank believes that a “substantial” tightening of financial conditions” since mid-2007 should achieve the “significant” slowdown of aggregate demand that will be needed to reduce CPI inflaiton from unacceptably high current levels to its target corridor. Because of the stimulus from a sharply higher terms of trade, officials are not fully certain this will be the case. A tax cut will also boost growth. So it’s a wait-and-see stance over the next several months, if not quarters.
Australia’s trade deficit of A$ 2.74 bln in March after A$ 2.36 bln in Feb was a little narrower than market expectations. Nonetheless, some further reduction of the shortfall in April seems probable.
China’s State Council Information Center projects growth of 10.8% in 2008, with CPI inflation of 7.5%. A central bank official said forex diversification from the dollar will be kept small.
Euroland’s service-sector PMI improved to 52.0 in April from 51.6 in March despite a big drop to 52.8 from 57.3 in the French index. The German PMI-services improved from 51.8 to 54.9, best in six months. The Italian index went up for a second straight time to 49.8 from 48.8 in March and 47.2 in Feb. Spain’s index firmed from 40.9 to 42.5, still indicating a fairly rapid rate of decline. Spain also reported a shocking 2.6% drop in March industrial production and a 15% on-year rise in unemployed workers in April. Euroland’s composite PMI (encompassing both manufacturing and services) edged up a tenth of a point to 51.9. Such stood at 57.5 last July just before the start of the global credit crunch.
Britain’s PMI-services sank to a 61-month low of 50.4 in April from 52.1 in March and a 5-month high of 54.0 in Feb. A reading of 51.6 had been expected. There were low readings of 51.0 in jobs and 51.5 in orders. Britain’s financial services look especially vulnerable.
Producer Prices in Euroland increased 0.7% in March. The PPI rose 7.8% saar in 1Q08, up from a pace of 5.2% in 4Q07 and 4.1% in 3Q07, and the advance from March 2007 reached 5.7%.
Swiss consumer prices rose 0.8% in April. That gain was a tenth less than expected and resulted in a reduced 2.3% 12-month increase after 2.6% y/y in March.
Democratic Party primaries are scheduled today in Indiana and North Carolina.
Tens of thousands of people remain missing in the wake of the Southeast Asia cyclone.
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