New Developments Abroad

May 15, 2008

The dollar is mixed, with drops of 0.2% against the euro and C-dollar and of 0.1% relative to the A$, but rises of 0.6% against the kiwi and 0.1% versus sterling. Yen and Swissy are unchanged.

The Nikkei climbed 0.9% to a 4-month high, but China’s CSI 300 (-0.7) and the Hang Seng (-0.1%) fell. Dax and Paris Cac are unchanged. The Ftse is 0.3% firmer.

Ten-year JGB yields gave back 3.5 bps of Wednesday’s sharp climb. Other soverign bond yields extended recent gains.

Oil rose 0.4% to $124.71/bbl. Gold is steady at $866.60/oz.

Euroland GDP rose 0.7% in 1Q from 4Q07 (not annualized) after +0.4% in the fourth quarter and matching growth in 3Q07. This greater-than-forecast result was powered by surprisingly buoyant growth in Germany (+1.5%) and France (+0.6%). On-year growth in Euroland remained steady at 2.2%. Growth was led by business investment. A sharp slowdown in growth is likely from the second quarter onward.

Harmonized consumer prices in Euroland firmed 0.3% m/m in April, but their 12-month rate of increase settled back to 3.3% after spiking to 3.6% in March. Core CPI (excluding unprocessed food and energy) rose 0.2% m/m and 2.4% y/y, the latter down from 2.7% y/y in March.

Core Japanese machinery orders fell 8.3% in March, more than the forecast 5.5% drop, following a 12.3% monthly plunge in February. The 2.2% rise in 1Q was less than the 3.5% advance that officials had predicted and points to weakening investment.

Japanese stock and bond transactions generated a net Y 965 bln inflow last week, more than twice as much as in the week to May 3rd.

The IFO Institute’s quarterly economic climate index for Euroland fell in 2Q for a third straight time and to a five-year low of 76.3 after 81.4 in 1Q08.

New Zealand real retail sales plunged 1.2% in 1Q, four times more than expected. This was the greatest drop since 1Q97 and suggests the economy may be teetering on the brink of recession.

Australian average weekly earnings rose 1.1% q/q and 4.8% y/y during the three months to February. The Reserve Bank of Australia sold AUD 305 million last month.

Chinese fixed asset investment rose 25.7% y/y in Jan-April similar to a 25.8% increase in CY07.

British Prime Minister Brown voiced hope that the Bank of England could cut interest rates further. The Fed’s Yellen pledged determination to avoid spiraling inflation. Both Trichet and Bernanke have public speeches today.


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