New Developments Abroad

June 26, 2008

The dollar is 0.4% softer against sterling, which was buoyed by Bank of England King’s assertion that his letter on inflation had been meant to be balanced, not dovish as some in the market had perceived it.  The dollar also lost 0.4% against the Swiss franc and is down 0.2% against the euro and by 0.1% against the yen, C-dollar, and Aussie dollar.  The kiwi slid 0.3% in response to a bigger-than-expected NZ$ 2.16 billion New Zealand current account gap in 1Q08.

European stocks are considerably weaker: Dax -1.5%, Ftse -1.4%, and Cac40 -1.2%.

In Asia, the Nikkei slipped just 0.1%, but its 6-session streak of declines is the longest of 2008 and cumulates to -4.4%.  China’s CSI-300 rose 0.4%, but the Hang Seng index fell 0.8%.

The yield on ten-year JGB’s fell another 2 basis points to 1.655%, encouraged by the FOMC statement.

Oil edged up 0.1% to $134.69/barrel.  Gold jumped 1.3% to $893.90/ounce, as the FOMC statement failed to endorse a more stable dollar.

Italian business sentiment fell from 89.4 in May to a 35-month low of 87.1 in June.  A score of 89.0 was anticipated.

French consumer confidence was socked by elevated energy costs, falling to -46, lowest since at least 1987, from -42 in May and -38 in April.

Bad inflation data continues to pile up around the world.  German import prices leaped 2.4% m/m in May, the most since Sept 1990, which lifted the 12-month increase to 7.9%, highest since November 2000, from 5.7% in April and 0.6% in the year to May 2007.  On-year CPI inflation climbed by 0.3 percentage points in the German states of Saxony and Hesse to 3.4% and 3.8%, respectively.  Belgian CPI inflation accelerated to 5.8% y/y in January from 5.2% in May. Icelandic consumer price inflation rose to a 214-month high of 12.7% year-on-year in June from 12.3% in May and 4.0% in June 2007.  South African producer price inflation hit a 19-year peak of 16.4% in May, up from 12.4% in April.

Australian job vacancies were 9.4% higher in March-May than a year earlier and 3.4% greater than in December-February.

Japanese stock and bond transactions generated a Y 1077 billion outflow last week, reversing a Y 1051 billion inflow the week before.

Euroland M3 grew 10.5% y/y in May and 10.4% y/y in March-May.  Loans to firms decelerated to 14.2% y/y in May, the first slowdown in 7 months from a peak of 15.0% in April.  Mortgage lending (+5.5% after 5.9% y/y in April) continued to slow in the face of high energy costs and sliding property values. ECB officials will welcome the slower pace in corporate lending but seek a much further decline.  A rate hike in July remains highly likely.

According to a Mastercard survey, consumer confidence in Asia fell sharply to 56.0 in May from 69.3 last November.

Italy’s employer lobbying group is forecast economic growth of just 0.1% this year followed by 0.6% in 2009 in Italy.

Investment spending last quarter in Britain was revised to -1.8% from -1.4% reported initially. 


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