New Developments Abroad

May 29, 2008

The dollar is stronger as markets look ahead to eventual Fed tightening, with gains to 0.7% against the Swiss franc, 0.5% against the euro, 0.4% versus the Aussie dollar, 0.3% against the yen, 0.2% relative to sterling, and 0.1% against the Canadian dollar.

The Nikkei leaped 3.0%, and 10-year JGB yields advanced 5 bps to 1.81%. Stocks mixed elsewhere in Asia: Kospi +2.0%, Hang Seng +0.6% but CSI 300 down 2.6%. In Europe, the Ftse is up 0.8%, and the Dax is 0.4% higher.

Oil settled back 0.5% to $130.36/barrel. Gold lost 0.7% and dipped under $900 to $898.70/oz.

Japanese retail sales in April performed below expectations, dipping 0.1% m/m and firming just 0.1% y/y. Large-store sales slumped 2.2% y/y compared to on-year drops of 0.3% in 1Q and 1.0% in 4Q07. Non-food and non-energy retail sales fell 0.7% y/y.

Japanese stock and bond transactions generated a Y934 bln outflow last week.

Australian business investment declined 2.5% last quarter. A rise of about that much had been anticipated. Several analysts now suspect GDP declined for the first time since 2000 last quarter.

German labor statistics were significantly softer than assumed. Unemployment rose just 4K in May, reversing April’s drop. Such was the first increase since March 2006. The jobless rate held steady at 7.9%, however, and jobs grew 1.6% in the year to April. Mild 1Q weather was responsible for better-than-forecast data in 1Q and weaker-than-assumed figures in April-May.

According to Bloomberg, Euroland’s retail PMI improved to 53.1 in May from 41.8 in April, led by improved conditions in Germany.

Economic sentiment in Euroland stabilized at 97.1 in May despite a sharp erosion of consumer confidence to -15 from -12 in April. A separate business climate index improved to 0.54 from 0.43. Industrial sentiment stayed at -2. Germany and Italy were better. France worsened.

Euroland M3 growth picked up to 10.6% y/y in April from 10.1% in May, but the 3-month rate of growth slowed to 10.7% y/y from 11.0%. Loans to firms were still very rapid at 14.9% y/y. Mortgage loans dipped to 5.9% y/y from 6.1%. The data are consistent with recent trends and will not alleviate the concern by ECB officials about future inflation.

Belgian CPI inflation shot up 0.9% m/m to a 23-year high of 5.2% in May.

South African PPI inflaiton accelerated to 12.4% y/y in April from 11.9% in March.

Household borrowing in New Zealand posted the smallest rise in April (0.3%) since Dec 1990.

In Britain, the CBI distributive trades survey produced a retail sales balance of -14 in May compared to scores of -26 in April and +1 in March. Inflation expectations have not been higher than now since August 1992.

But the U.K. housing market implosion is accelerating. The Nationwide house price index sank 4.4% y/y, most since December 1997, and its 2.5% m/m drop was a record decline.


Comments are closed.