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Equities nervy in Asia & the US as Fed's Lacker repeats primacy of fighting inflation and Mr Greenspan repeats warnings over "exuberance" on China's stock markets.. - limited progress on Sino-US trade talks (more flights, limited opening of financial markets) but little give on the exchange rate - as yet! - UK: as the UK outlines its plans for energy generation it highlights the debate over policy v market led green initiatives. - Data today: final German Q1 GDP, May business surveys in France, Italy, Germany(ifo expected to rise), UK investment figures, US durable goods, jobless claims & New Home sales(see below for details). General election in Ireland today. OECD Half Yearly Economic Outlook today(tonight we publish our new global economic forecasts) Equities a bit wobbly both in the US and Asia. A range of issues contributing to the nervy mood: higher oil prices, worries over sticky inflation due to high food prices, The Fed's Mr Lacker repeating the importance of containing inflation expectations and Mr Greenspan(who he?), adding his concerns to everyone else's worries about a stock market correction in China. After rising some 90% this year, you don't have to be the ex-Fed Chairman to think a substantial correction might be on the cards and indeed this is one threat the OECD is likely to raise itself when it publishes its half yearly economic outlook today. Expect the OECD to be broadly upbeat about the economy though. In Japan, the IMF has taken a similar line to us in that it argues there's no need for the Bank of Japan to consider a rate hike anytime soon given the very tame inflation outlook(next Japanese consumer price data tomorrow!). And yesterday in the UK the news that the Bank of England actively and seriously considered a 50 bp hike in rates at its last meeting has confirmed expectations of another hike later in the summer - we'd reckon on August. Sino-US trade talks still ongoing but so far with only limited progress on air travel between the two and a limited opening of access to China's domestic financial markets. Expect some more news today but this is unlikely to include much on the Yuan. Slowly - slowly seems to be the name of the game with China As the UK Government unveils its plans for energy production/green energy over the coming decades, one(big) oil company announces its closing its carbon-capture energy project in Scotland. But as I listen to the agricultural programme on the radio, farmers in the UK are taking advantage of the cap and trade carbon schemes already in operation in the US to channel US corporate funds to British agriculture. Another good illustration of the debate about the respective roles of market led v policy led progress on the "greening" of business. Norway: strong Q1 GDP in the first quarter(1.4%qoq, 4.9%yoy, versus the central bank's expectation of 0.9%qoq), supported by robust employment growth(of 0.8%qoq in Q1 keeps us on course not just for a rate hike of 25 bps on May 30 but for more tightening over the balance of the year. We think the central bank will lift its interest rate path when it next releases its Monetary Policy Review on June 27 and to reflect this belief combined with our view that growth in 2007 as a whole will be somewhat stronger than previously envisaged (4.1% y/y compared to 3.6%) - primarily reflecting higher private consumption and stronger investment growth - we are raising our year-end 2007 forecast for the Norges Bank policy rate by 50bp to 5.25% from the previous forecast 4.75%(currently 4.0%). Data today: we get the US durable goods orders for April: we go for a fall in the headline rate of -0.8%mom v cons of +1.0% and the previous +4.3%. Ex transport we see +0.9%mom v cons 0.6% and prev. 1.4%. Watch for core capital goods order which we think will be up 0.5% after 0.6% the month before and keep an eye on the shipments figures too. On April new home sales we see a rise to 890K v cons 860K and previous 858K. But even this modest rise in sales would do little to change expectations that homes construction may still be in for another downward leg unless sales pick up more vigorously soon. For initial jobless claims for week ending May 19 we forecast 300K v cons 305K and prev 293K(the next non farm payrolls is a week tomorrow with the market on 140K v prev 88K) In Europe today its the May business surveys to watch for . The market goes for an unchanged INSEE index in France of 111(we see 110), in Italy the consensus sees a small easing in the business survey to 97.7 from 98.2 while in Germany both we and the market forecast a rise in ifo(we go for 109.2 v cons 108.8 and prev 108.6) Both current conditions and expectations are forecast to improve. We also get final Q1 GDP data for Germany - expected to confirm the provisional 0.5%qoq rise.
Equities nervy in Asia & the US as Fed's Lacker repeats primacy of fighting inflation and Mr Greenspan repeats warnings over "exuberance" on China's stock markets.. - limited progress on Sino-US trade talks (more flights, limited opening of financial markets) but little give on the exchange rate - as yet! - UK: as the UK outlines its plans for energy generation it highlights the debate over policy v market led green initiatives. - Data today: final German Q1 GDP, May business surveys in France, Italy, Germany(ifo expected to rise), UK investment figures, US durable goods, jobless claims & New Home sales(see below for details). General election in Ireland today. OECD Half Yearly Economic Outlook today(tonight we publish our new global economic forecasts) Equities a bit wobbly both in the US and Asia. A range of issues contributing to the nervy mood: higher oil prices, worries over sticky inflation due to high food prices, The Fed's Mr Lacker repeating the importance of containing inflation expectations and Mr Greenspan(who he?), adding his concerns to everyone else's worries about a stock market correction in China. After rising some 90% this year, you don't have to be the ex-Fed Chairman to think a substantial correction might be on the cards and indeed this is one threat the OECD is likely to raise itself when it publishes its half yearly economic outlook today. Expect the OECD to be broadly upbeat about the economy though. In Japan, the IMF has taken a similar line to us in that it argues there's no need for the Bank of Japan to consider a rate hike anytime soon given the very tame inflation outlook(next Japanese consumer price data tomorrow!). And yesterday in the UK the news that the Bank of England actively and seriously considered a 50 bp hike in rates at its last meeting has confirmed expectations of another hike later in the summer - we'd reckon on August. Sino-US trade talks still ongoing but so far with only limited progress on air travel between the two and a limited opening of access to China's domestic financial markets. Expect some more news today but this is unlikely to include much on the Yuan. Slowly - slowly seems to be the name of the game with China As the UK Government unveils its plans for energy production/green energy over the coming decades, one(big) oil company announces its closing its carbon-capture energy project in Scotland. But as I listen to the agricultural programme on the radio, farmers in the UK are taking advantage of the cap and trade carbon schemes already in operation in the US to channel US corporate funds to British agriculture. Another good illustration of the debate about the respective roles of market led v policy led progress on the "greening" of business. Norway: strong Q1 GDP in the first quarter(1.4%qoq, 4.9%yoy, versus the central bank's expectation of 0.9%qoq), supported by robust employment growth(of 0.8%qoq in Q1 keeps us on course not just for a rate hike of 25 bps on May 30 but for more tightening over the balance of the year. We think the central bank will lift its interest rate path when it next releases its Monetary Policy Review on June 27 and to reflect this belief combined with our view that growth in 2007 as a whole will be somewhat stronger than previously envisaged (4.1% y/y compared to 3.6%) - primarily reflecting higher private consumption and stronger investment growth - we are raising our year-end 2007 forecast for the Norges Bank policy rate by 50bp to 5.25% from the previous forecast 4.75%(currently 4.0%). Data today: we get the US durable goods orders for April: we go for a fall in the headline rate of -0.8%mom v cons of +1.0% and the previous +4.3%. Ex transport we see +0.9%mom v cons 0.6% and prev. 1.4%. Watch for core capital goods order which we think will be up 0.5% after 0.6% the month before and keep an eye on the shipments figures too. On April new home sales we see a rise to 890K v cons 860K and previous 858K. But even this modest rise in sales would do little to change expectations that homes construction may still be in for another downward leg unless sales pick up more vigorously soon. For initial jobless claims for week ending May 19 we forecast 300K v cons 305K and prev 293K(the next non farm payrolls is a week tomorrow with the market on 140K v prev 88K) In Europe today its the May business surveys to watch for . The market goes for an unchanged INSEE index in France of 111(we see 110), in Italy the consensus sees a small easing in the business survey to 97.7 from 98.2 while in Germany both we and the market forecast a rise in ifo(we go for 109.2 v cons 108.8 and prev 108.6) Both current conditions and expectations are forecast to improve. We also get final Q1 GDP data for Germany - expected to confirm the provisional 0.5%qoq rise.