New Developments Abroad

May 8, 2008

The dollar is mixed. Biggest gain is +1.2% against kiwi. Largest loss is -0.5% against the yen. Also down 0.2% against sterling and -0.1% versus the A-dollar. Up 0.3% against the euro and unchanged against the Swiss franc and C-dollar.

Ten-year JGB auction attracted weak demand — yield off 1 bp. Other sovereign bond yields are up. The Nikkei (-1.1%) and Hang Seng (-0.6%) closed lower. Chinese equities rose 2.7%. The Dax (-0.4%) and Ftse (-0.3%) are lower.

Oil eased 0.3% but is still above $123/bbl. Gold is 0.3% firmer at $873.80/oz. In the wake of the Myanmar cyclone, rice prices rose another 3.5% and are up 61% since end-2007.

German industrial output slid 0.5% in March but rose 2.3% in 1Q08. The German current account surplus fell 17% y/y in March but widened 3.2% y/y in 1Q08. The seasonally adjusted trade surplus of EUR 15.4 bln was less than forecast. Export momentum is slowing.

Australian jobs rose 25.4K in April, consistent with their 12-month pace of increase and more than had been projected. The jobless rate ticked up a tenth to 4.2%.

But New Zealand jobs fell 1.3% in 1Q08, the largest drop since 1Q89, which sent the kiwi lower on talk that a rate cut may occur sooner than assumed heretofore.

The Bank of Korea left its base rate at 5.0% for a ninth straight month. Opinion had been evenly divided on the possibility of a rate cut.

Swedish industrial output slid 0.1% m/m and rose 0.8% y/y in March. Swiss unemployment edged higher in April, its first rise since August 2003. Irish CPI slowed to 4.3% y/y in April from 5.0% in March.

The Chinese yuan posted its largest daily drop of 2008, fanning speculation that policymakers are increasingly opposed to their currency rising against the dollar.

Markets await monthly rate decisions from the Bank of England in 15 minutes and the ECB in 60 minutes. Neither is likely to change rates.


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