New Developments Abroad: Aversion to Risk

July 16, 2008

The carry trade-funding currencies are higher.  USD/JPY fell 0.8%, and the dollar is 0.6% lower against the Swiss franc.  The greenback also eased 0.2% against the euro and C-dollar but is unchanged relative to sterling and the Australian dollar.

The 10-year yield on JGB’s rose 3 basis points to 1.575%, but European sovereign bond yields have declined.

European stocks are down further: Ftse -0.9%, Cac40 -0.6% and Dax -0.5%.  In Asia, China’s CSI 300 tumbled 3.8%, and equities fell 1.8% in Taiwan, but they rose 1.1% in Australia and 0.1% in Japan.

Gold slid 0.4% to $974.70/ounce.  Oil is 0.3% lower at $138.39 per barrel.

Japan’s tertiary index for services fell 0.2% in May but was 1.3% higher in April-May than in 1Q.  The tertiary index also fell 0.2% from May 2007.

The Bank of Japan downgraded its overall economic assessment as well as its view on exports, production, and housing.

Yet another Asian central bank, the Bank of Thailand, raised its benchmark interest rate.  It did such in response to inflation hitting a 10-year high.  The rate was lifted 25 basis points to 3.5%.

Minutes from the Swedish Riksbank showed unanimous support for the 25-bp rate hike to 4.5%, but a 3-3 split over the likely need for two more rate hikes within the year.

Consumer prices in Euroland rose 0.4% m/m and 4.0% y/y in June.  France, Italy, Spain, Greece, Austria, Finland, Belgium and Slovenia had inflation of 4.0% or higher.  Inflation was paced by a 2.5% m/m leap in energy, which posted a y/y increase of 16.0% compared to 0.9% in the year to June 2007.  Core inflation (excluding energy and unprocessed food) remained steady at 2.5%.

German CPI inflation fo 3.3% y/y was its highest since December 1993.  There was a 0.3% rise from May.

British wages remained benign, rising 3.3% in the year to May, lowest in 12 months.  The advance in March-May was 3.8%.  U.K. unemployment rose 15.5K in June, most since end-1992, and May’s increase got revised up 59% to +14.3K.  Productivity in 1Q was at a 2-1/2 year low.

The Governor of the Reserve Bank of Australia, Stevens, gave a luncheon speech, reinforcing the message that the central bank expects 2Q CPI data due next week to show an acceleration but will not respond to such because it expects inflation to drop in the future on softening demand in the economy.

European new car registrations plunged 7.9% y/y in June and fell 2.2% y/y in 1H08.

Wage inflation in Japan was revised upward to 0.8% y/y in May from a preliminary estimate of 0.2%.  Such in April was also 0.8%.


Comments are closed.