New Developments Abroad

June 3, 2008

The dollar and sterling are lower in tandem, with losses of 0.6% against the Swiss franc, 0.4% versus the Aussie dollar, 0.3% against the euro, and 0.2% against the yen, C-dollar and kiwi.

Asian stocks much lower. Nikkei, Australian bourse and Hang Seng each -1.6%. European stocks mixed with Dax off 0.3% but Ftse up 0.2%.

Sovereign bond yields are off in continuing reaction to concerns about Lehman and other banks. 10-year JGB yield fell 5 basis points to 1.71%.

Oil slid 0.2% to $127.56/barrel, while gold firmed 0.1% to $898.10/ounce.

The Reserve Bank of Australia kept its 7.25% cash rate unchanged as expected. This 12-year high was first reached in March. Statement talks of substantially tighter financial conditions, slowing domestic demand, and coming big stimulus from stronger terms of trade. Bottom line is no rate changes are imminent, and another eventual rate hike remains possible if demand doesn’t slow as much as officials require or if expected inflation moves higher.

Australian government spending jumped 1.5% in 1Q, twice expectations, and home approvals went up 7.8% in April, the first increase in five months. Australia’s current account gap widened in 1Q to A$ 19.5 bln. 1Q GDP figures get released Wednesday. 0.3-0.4% growth is projected.

Euroland 1Q GDP growth was revised up a tenth to 0.8%, 3/4ths of which was powered by business investment and inventory building. Net exports provided a slight lift, not the drag that many had forecast. Consumer spending was weak. Nil growth in 2Q08 is expected.

Euroland producer prices advanced by expected 0.8% in April and by 6.1% from April 2007.

Swiss consumer price inflation jumped to 2.9% y/y in May, highest since October 1993 and up from 2.3% in April and 0.5% in May 2007. The CPI posted a 0.8% m/m increase.

Japan’s monetary base fell 0.9% in the year to May and by 0.7% y/y in Jan-May.

New car registrations fell by 2.8% in Germany and by 11.3% New Zealand in May from a year earlier.

Nigeria’s central bank raised its benchmark rate by 25 bps to 10.25% and also tightened reserve requirements. Central bank reports in Sweden and Norway warned in price risks.

Britain’s construction-sector PMI plunged from 46.1 in April to a series low of 43.9 in May.

A rush of super-delegate endorsements of Obama’s candidacy puts him just 43 short of amount needed for nomination. Clinton campaign appears to be shutting down.


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