New Developments Abroad

June 9, 2008

The yen is soft, trading down 0.7% against the dollar. The U.S. currency otherwise shows losses of 0.3% against the pound, 0.2% against the euro, and 0.1% against the C-dollar and Swiss franc. The kiwi and Aussie dollar are unchanged.

In Asia, the Nikkei sank 2.1%, the kospy fell 1.3%, and China’s CSI 300 slid 0.6%. European stocks are narrowly mixed: Ftse +0.1% but Dax off 0.2%.

Ten-year JGB yields fell 5 basis points to 1.73% in continuing very volatile activity.

Oil gave back 1.2% but is still very high at 136.87. Friday’s intra-day peak was $139.12/barrel compared to a low on Thursday of $121.61. Gold is 0.7% higher at $905.60/ounce.

Japanese M1, M2, and M3 recorded year-on-year changes in May of -0.7%, +2.0% and +0.3%, each of which was slightly stronger than on-year changes in April. Bank lending growth accelerated too from 1.2% in April to 1.5%. All of these gains are still pretty low, and the upticks of May are unlikely to be sustained in coming months.

Japan’s economy watchers’ index, a gauge of sentiment among workers in the service sector, fell further to 32.1 in May from 35.5 in April. Corporate bankruptcies declined 1.5% y/y in May. The diffusion index of leading economic indicators posted a sub-50 score in April of 30.0, the ninth sub-50 reading in a row. The coincident (22.2) and lagging (25.0) indices were also weaker than 50.

In Euroland, the Sentix index of investor sentiment unexpectedly improved in June to 5.2 from 3.5 in May, and Germany’s seasonally adjusted trade surplus in April of EUR 18.7 bln constituted a five-month high with export growth of 1.2% from March. The current account surplus widened 8.2% y/y to EUR 14.5 billion and was 5.2% greater in January-April than a year earlier.

Spain’s prime minister, Zaputero, blamed Trichet’s “imprudent” press conference remarks for Friday’s leap in oil prices. German officials defended ECB independence in response.

British producer price inflation in May surpassed expectations, greatly diminishing any flexibility for the Bank of England to cut its interest rates further. The PPI-O index jumped 1.6% from April and 8.9% y/y, the highest in at least 22 years. Core PPI-O posted a second straight monthly advance of 1.2% and an on-year increase of 5.9%, most since March 1991, demonstrating that strains are not limited to food and energy. The PPI-I index increased 3.8% from April and by 27.6% from may 2007.

Consumer sentiment in South Korea worsened to a 40-month low of 90.9 in May from 97.7 in April.

Home prices in New Zealand fell for a third straight month, dipping 0.3% and rising just 2.4% from a year earlier.

Greek consumer price inflation increased to a 10-year high of 4.9% in May. Core inflation rose to 4.2% from 3.7% in April. Swiss unemployment in May of 2.4% was the lowest reading since August 2002.

First-quarter GDP contracted 0.2% (0.9% y/y) in Portugal, but firmed 0.7% (2.8% y/y) in Finland.


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