New Developments Abroad

June 12, 2008

The dollar recorded additional solid gains of 1.1% against the Swiss franc and A-dollar, 0.9% against the euro, 0.8% versus sterling 0.7% against the yen and 0.4% relative to the C-dollar. From earlier lows this week, the greenback has recovered by 3.1% against the yen and A-dollar, 2.8% against the euro and Swiss franc, 2.5% versus the kiwi and 1.7% against sterling.

The Nikkei plunged 2.1% or 295 points. Stocks in China (-1.8%), South Korea (-2.4%) and Taiwan (-3.4%) also fell sharply. But the Ftse (+0.9%) and Dax (0.4%) are trading higher.

Commodities tanked Tuesday, recovered sharply yesterday, and are down sharply again today with losses of 1.1% to $134.83/barrel in oil and 1.2% to $872.70/ounce in gold.

Ten-year JGB yields settled back 3 basis points to 1.81%. Aussie bond yields dropped after a poor Australian labor report, but most other sovereign bond yields have risen.

Australian jobs fell 19.7K, their first decline after 18 consecutive increases. A rise of 13.5K had been anticipated. Australia’s jobless rate of 4.3% matched the rate in April and May 2007.

Stock and bond transactions last week generated a Japanese net capital inflow of y 341 billion.

Expected inflation in Australia accelerated to 5.9% in June from 5.2% in May. That was the highest since this data series began in 1993.

Euroland industrial production jumped 0.9% in April and 3.9% from a year earlier. This was a rare example of widely divergent results of the whole Ezone from Germany, where industrial output fell by 0.7%. Increased production of capital goods (2.0%) and consumer durables (1.7%) paced the rise in Ezone production. April production was 0.7% greater than the 1Q mean level.

Hourly labor costs in Spain soared 8.6% y/y in 1Q08 compared to a 4.4% rise in 4Q07.

Icelandic GDP sank 3.7% last quarter and recorded on-year growth of just 1.1%.

A Bank of England survey reviealed the sharpest expected CPI inflation (4.3%) since at least 1999 and a sharp acceleration from 3.3% in the previous survey taken in February. Stagflation tendencies are very pronounced in Britain. The Council of Mortgage Lenders (CML) reported a 37% decrease in mortgage loans between April 2007 and April 2008. New construction orders in Britain fell 2% y/y in April, led by a 17% dive in new private houses.

Chinese CPI inflation settled back to 7.7% y/y in May from 8.5% in April and a peak of 8.7% in February. Food inflation slowed to 19.9% from 22.1%. All other prices went up 1.7% y/y, down from 1.8% in April. On the other hand, money and loan growth picked up in May. M2 expanded 18.1% y/y, up from 16.9% in April, and yuan lending jumped 28.3% y/y after 28.0% in April.

Irish CPI rose 0.8%, lifting the 12-month inflation pace to 4.7% in May from 4.3% in April.

As expected, the Bank of Korea left its benchmark rate unchanged at 5.0%. That rate was last lifted by 25 bps each in July and August of 2007, just before the onset of the global credit crunch


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