New Developments Abroad: Considerable Financial Market Turbulence

July 1, 2008

Equities In Europe, the Ftse (-2.5%), Cac40 (-2.6%) and Dax (-2.0%) are sharply lower.  In Asia, the CSI 300 slumped 3.4% but the Nikkei edged only 0.1% lower.

The ten-year JGB yield is 8.5 basis points above Monday’s low.

The dollar shows losses of 0.8% against the yen and Aussie dollar, 0.6% against the kiwi, 0.3% versus the C-dollar, and 0.2% against the euro and Swiss franc.  The dollar firmed 0.1% against sterling.

Oil and gold rose 1.8% and 0.5% to $142.48/bbl and $932.30/ounce.

The Bank of Japan quarterly business survey was somewhat better than expected but still exhibited weakness compared to the March survey.  Conditions for big manufacturers worsened to a reading of 5 from 11.  Conditions for all firms had a score of -7 after -4.  Smallest investment plans for a June survey since 2002. Overtime pay fell on-year in May for the first time this year.  Non-mini motor vehicle sales slid 0.9% y/y in 1H08.  Land prices rose for a third straight year in 2007, notching a 10% gain.

The Reserve Bank of Australia left its cash rate at 7.25% and released a statement that sounded a bit more confident about the economic slowdown.  Officials have said that rates would have to go higher if such a slowdown is not sustained.

Euroland’s jobless rate was revised up by a tenth for December-through-April and remained steady at 7.2% in May.

German unemployment fell 38K in June, more than had been forecast.  The jobless rate was 7.8%, down from 7.9%.

Euroland PMI-manufacturing scores fell sharply in June.  Germany at 52.6 versus 53.6 in May.  Italy at 46.9 after 48.0.  France at 49.2 vesus May’s 51.5 score. Spain at 40.6 after 43.6 and below expectation of 43.5.  Euroland PMI-mfg at 49.2 compared to flash indication of 49.1, 50.6 in May and 55.6 in June 2007.

German real retail sales excluding automotive recovered 1.3% m/m and rose 0.7% y/y according to government data.  Such slid 0.3% m/m and rose 1.3% y/y according to central bank data, which also showed a rise of 2.6% m/m if the automotive sector is included.

Britain’s nationwide house price index fell 0.9% m/m and by 6.3% y/y in June, the biggest 12-month drop since December 1992.  It was down 4.4% y/y in April.

The British PMI-mfg slumped to 45.8 in June from 49.5 in May and 55.1 in June 2007.  That’s the worst score since end-2001 and compares to expectations of 49.8.  Input prices climbed from 76.9 to 82.1, highest since at least 1992.

OECD CPI inflation of 3.9% in May was up from 3.5% in April and represented a 7-year peak.

South Korean CPI inflation of 5.5% in June was its highest since November 1998. Thai CPI inflation of 8.9% in June was at a 10-year high.

PMI readings fell also in South Africa to 43.8, Switzerland to 54.9, Sweden to 50.6, and Denmark to 63.0.

Canadian markets today are closed for holiday.  France assumed the EU presidency, which it will hold until the end of 2008.  In Australian, extensive tax cuts that were legislated before the last election took effect.


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