New Developments Abroad: Weak German And French Trade Figures

July 9, 2008

Stock markets in Asia and Europe performed better.  China +3.9% on signs of possible policy priority shift toward fostering growth from price containment.  Hong Kong +2.8%.  Nikkei +0.2%.  Australia +1.6%.  German Dax and Paris Cac +1.2%.  Ftse +1.5%.

South Korean won had its best day in a decade after another $3 billion of intervention support.  Korean PPI jumped 1.6% m/m and to 10.5% y/y, most since November 1998.  M2 increased 15.8% y/y in May, most since June 1999.  Central bank officials indicate they will not resist further won strength through the 1000/$ barrier to a 3-digit figure.  In contrast to rising stocks elsewhere in Asia, the Kospi fell 0.8%.

The dollar slid 0.3% against the euro and Canadian dollar and 0.2% versus the yen, sterling, and Swissy.  The USD rose 0.2% against the Aussie dollar.

Not much change in sovereign bond yields.  10-year JGB yield flat at 1.615% after early jump.

Oil spiked back as high as $138.28/barrel on news Iran test-fired 9 long-range missiles.  Presently oil is 2.0% higher on net.  Gold steady at $924.60/oz.

Core Japanese machinery orders advanced 10.4% m/m in May compared to forecasts of +1.1%.  Gain was led by steel and chip-making equipment.

Australian consumer confidence sagged to the lowest level since early 1992.  It was off 34.6% in the year to July.  Housing finance fell four times more than was expected in May, dropping 7.9% m/m and 21.5% y/y.

Canadian consumer confidence fell near to a 13-year low.

Economic growth in Euroland during 1Q08 was revised downward by a tenth to 0.7% from 4Q07 and 2.1% y/y.

Germany’s seasonally adjusted trade surplus narrowed 18% between April and May, as exports fell 3.2% while imports increased 0.7%.  Export weakness was concentrated in commerce with fellow Ezone partners.  The deterioration in May had not been anticipated.  The French trade deficit in May widened 24.7% despite a smaller energy shortfall.  Industrial goods generated a EUR 2.328 billion deficit, 49% wider than in April.

Trichet of the ECB made some hawkish remarks, stressing ultra-importance of containing price expectations.  But he also engaged in some verbal jaw-boning to promote a firmer dollar and yuan.

Chinese consumer confidence softened in May as it had also in April.  Analysts are predicting 2Q08 will show the lowest on-year GDP growth in six quarters.

British shop price inflation accelerated to 2.5% y/y in June from 1.8% in May, according to the British Retail Consortium.  U.K. trade figures in May was pretty much as expected.  The merchandise trade deficit of Gbp 7.494 billion was down from Gbp 7.527 billion in April.  The goods and services shortfall widened 4.6% to Gbp 4.24 billion.  Nationwide’s measure of U.K. consumer confidence posted a sixth straight monthly drop in June to at least a 4-year low.


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