New Developments Abroad

May 13, 2008

The dollar regained strength today, climbing 0.7% against the kiwi and Aussie dollar, 0.6% against the euro and pound, 0.5% relative to the Swiss franc and 0.4% against the C-dollar. $/yen dipped 0.1%, however.

China’s CSI 300 equity index fell 1.4% on concern about the eventual earthquake impact. Good medium-term prospects are perceived to remain intact, but disaster poses new stress for the Olympics. The official death toll is at around 12K, but it is expected to go much higher.

Other Asian bourses are mostly higher (Nikkei +.5%, Hang Seng +2.0% and Kospi +1.1%), but stocks in Europe are down (Ftse -1.2% and both Dax and Paris Cac off 0.4%).

Sovereign bond yields are mostly higher. 10-year JGB +0.5 basis points at 1.585%.

Oil’s drop was extended 0.2% to $123.92/bbl. Gold fell 0.8% to $878.70/oz.

British consumer prices leaped 0.8% m/m in April, most since May 2001. The 12-month rate of climb advanced to 3.0%, most since March 2007, from 2.5%. RPI inflation increased to 4.2% from 3.8%. Gains were led by food and fuel, and data have further dampened expectations of a rate cut as soon as June. RIC’s house price balance index fell from -79.4 in March to -95.1 in April, the worst reading since this data series began to be published in 1978. The British Retail Consortium reported a 1.5% on-year decline in same-store sales for April.

A German deputy economics minister said first-quarter growth may have accelerated to as much as 0.9% versus 4Q07. The first GDP estimate gets released this Thursday.

Chinese retail sales growth picked up to a 9-year high of 22.0% in April from 20.6% y/y in 1Q. This strength exceeded forecasts.

Chinese M2 expanded 16.9% in the year to April, more than expected and up from 16.3% in March. Yuan loans rose 14.7% y/y. The corporate goods prices index climbed 0.7% m/m and 10.3% y/y in April.

The new Australian Labour government unveiled a budget with a record surplus of nearly 2% of GDP, spending growth of only 1.1%, and promised tax reductions. The budget projects higher 4.0% CPI inflation in FY07/08, followed by 3.5% next fiscal year. Growth is forecast to slow from 3.5% in FY07/08 to 2.75% in FY08/09.

Spanish CPI inflation eased to 4.2% y/y in April from 4.5% in March.


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