New Developments Abroad

June 2, 2008

Sterling (-1.0% against the dollar) is weak, while the yen (+0.6%) has strengthened. Other currency movments since Friday’s close are insignificant.

In Asia, the Nikkei rose 0.7%, while stocks in China and Hong Kong rose 0.4% and 1.2%. But in Europe, the Dax (-1.0%) and Ftse (-0.8%) are lower.

Sovereign bond yields are mostly higher. 10-year JGB advanced 1 bp to 1.75%.

Oil fell 0.8% to $126.30/barrel, but gold rebounded 0.4% to $895.50/ounce.

Australian retail sales slid 0.2% in April after a downwardly revised 0.2% rise in March. This weaker-than-expected result has dampened rate hike expectations. The RBA is not expected to change its 7.25% cash rate this week. In other Australian diata, a monthly CPI proxy put inflation in May at a 5-year high of 4.5%, new home sales in April firmed 0.1%, the commody price index jumped 6.1% in May, and gross corporate profits in 1Q increased 2.2%. The Aussie PMI factory index fell to 51.2 in May from 52.7 in April.

Japanese non-mini vehicle sales fell 6.1% y/y in May. Japan’s output gap widened to a 4-quarter high of 0.7 in 1Q from 0.3 in 4Q07. Total cash earnings in Japan increased by a weak 0.6% in the year to April.

Euroland’s PMI-mf’g index in May was revised up a tenth to 50.6. That was still down from 50.7 in April, 52.0 in March and 55.0 in May 2007. The German index held steady at 53.6. The French index improved to 51.5 from 51.1 in April. But Italy’s PMI slid to 48.0 from 48.2, and Spain’s plunged further to 43.8 from 45.2 in April and 53.3 in May 2007.

Britain’s PMI-mf’g fell to 50.0 from 50.8 in April. It’s the weakest reading since July 2005. According to BBA data, mortgage approvals of 58K in April were at a record low and below an expected 65,000.

Other purchasing manager reports showed the Swiss index at 55.7, down from 56.7 in April, the Swede index at 51.2, up from 50.1, and South Africa’s reading at 49.1 versus 54.1 in April. Hong Kong’s index edged up to 50.3 from 50.1. China’s gauge slid to 54.7 from 55.4.

Indonesian CPI inflation accelerated to 10.4% in May, a 20-month high.

Swiss GDP growth decelerated to 0.3% (3.0% y/y) in 1Q from 0.9% (3.6% y/y) in 4Q07.

A meeting of EU finance ministers resulted in many hawkish remarks afterward. French car registrations rose 7.1% y/y in May. Norway’s credit grew 14.3% y/y in April, surpassing forecasts. Spanish car sales plunged 24.3% in the year to May.

The IMF revised projected 2008 growth in Euroland to 1.75% from 1.4% and abandoned its view that the ECB could cut rates later this year.


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