New Developments Abroad

May 30, 2008

The dollar is mixed despite lower oil prices. There are dollar losses of 0.3% against the kiwi, 0.2% versus the Aussie dollar, and 0.1% against carry trade-financing currencies like the yen and Swiss franc. The Greenback has risen 0.4% against the C-dollar, 0.2% against sterling and 0.1% versus the euro.

Oil fell 0.8% further to $125.66 per barrel. It peaked earlier this month at $135.09. Gold is at $883, well below the $900/ounce threshold.

The Nikkei advanced another 1.5% and 3.5% for the month of May. The Dax is 0.6% higher. The 10-year JGB yield slid 3 basis points to 1.76%, but most other sovereign bond yields rose.

In a slew of end-of-month Japanese statistics, the main surprises were a two-tenths increase in the jobless rate to a 7-month high of 4.0% and a sharp 2.7% on-year drop in real household spending in April, which also fell 0.7% from March. Consumer prices dipped 0.1% m/m and to 0.8% y/y from 1.2%, while X-food consumer price inflation dropped to 0.9% in April from 1.2%, reflecting the temporary expiration of a gasoline tax. Non-food, Non-energy consumer prices firmed 0.2% m/m but dipped 0.1% y/y. Japan’s job offers ratio of 0.93 in April was down from 0.95 in March and lower than anticipated, and employment fell by 0.2% y/y for a third consecutive month. Industrial production slid by an as-expected 0.3% in April, while housing starts and construction orders fell by 8.7% and 8.4% in the year to April. The manufacturing PMI fell to 47.7 in May from a 48.6 reading in April.

Euroland’s on-year CPI inflation returned to a cyclical high of 3.6% in May from 3.3% in April, while the Bloc’s jobless rate held at 7.1% for a third consecutive month.

Retail sales in Germany provided the biggest data shock, however, falling in April by 1.7% m/m excluding autos and gas stations and by 3.3% including such. Real retail sales in January-April were 0.9% lower than a year before. Higher commodity prices are squeezing discretionary spending and depressing consumer confidence.

Producer prices in April rose by 0.7% (5.4% y/y) in Italy and 0.4% (6.3% y/y) in France. Italian harmonized consumer prices rose 0.6% in May and 3.7% y/y. The national CPI rate of 3.6% was its highest since August 1996.

British consumer confidence slid from -24 in April to -29 in May, lowest since Thatcher stepped down in 1990. Pay deals in Feb-April averaging 3.2% were somewhat lower.

Russian real GDP growth accelerated to 8.4% in April from 8.1% in both March and 2007. India posted on-year growth of 8.8% in 1Q08, more than forecast, and 9.0% in fiscal 2007/8. Emerging markets are still performing decently.

Polish GDP growth rose 6.1% y/y in 1Q08, a little faster than assumed.

Australian private credit expanded only 0.4% in April, the least since July 2001, but still showed on-year growth of 14.1%.

Canada reports 1Q GDP at 12:30 GMT. U.S. data releases today include personal income, consumption and the core PCE deflator, midwestern PMI’s, and final U Michigan sentiment.


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