The drop in the non-petroleum deficit makes me wonder: How big an effect will this have on ROW and when will it happen. I think Germany may be a lead indicator. The first casualty in a slowdown would probably be capital goods and Germany may be hardest hit by such a development. On the other hand, Russia is growing from oil exports, and they are a natural big market for Germany. The net effect of oil price rise must be to exacerbate the current deficiency in aggregate global demand, though, which should impact big exporters first.

I believe that Brad is correct about the effect of swap lines on the Fed’s holdings of foreign currency assets. Also, don’t forget the swap line with the Swiss now worth up to $12mn, so even if you find a eurozone equivalent of Z1, it will not match exactly.

"…Copper may have further to increase. In inflation-adjusted terms, the price has not yet reached a record, according to Barclays. "…Adjusted for inflation, the metal is trading close to levels last seen a century ago, when the U.S. economy was expanding and the nation was being wired for electricity. China, which is making a similar transformation, is building power stations and transmission lines that are exacerbating deficits in metals supply. As much as 80 percent of China’s grid investment is spent on copper… "There just hasn’t been enough planning to accommodate the growth of Asia’s economies,"…" http://www.washingtonpost.com/wp-dyn/content/article/2008/05/10/AR2008051000151.html

Unfortunately I don’t know where to find an equivalent of Z1 on eurozone.

Laurent — I suspect that the ECB is borrowing $ from the fed to lend to European banks, and as it does so through swap lines, it would be posting euros as collateral with the fed. That at least would be my guess.

China unveils new jumbo jet company: report

May 11 03:18 AM US/Eastern

China unveiled its own jumbo jet maker in Shanghai on Sunday, state press reported, in a move that could eventually rival Airbus and Boeing.

The new company, Commercial Aircraft Corporation of China (CACC), will be responsible for researching, developing, manufacturing and marketing a made-in-China large passenger aircraft, Xinhua news agency said.

China announced early last year that it planned to develop a 150-seat passenger aircraft, which could eventually compete against planes made by Boeing and Airbus, the world’s two dominant commercial jet makers

"…The immigration authorities flatly rejected Detecon’s first application for permission to hire the Mexican national… It took another three-month marathon of negotiations before Escalante-Mendieta was finally approved… But Escalante-Mendieta, for his part, could easily have lived with rejection. "Then I would simply have gone someplace else," he says. After graduation, he says, he received "four lucrative offers from different countries." The Detecon story is not unusual. Ironically… the country is on the verge of spoiling its own future by making it difficult for German companies to hire foreign nationals… political parties are determined to satisfy the growing demand for highly skilled specialists mainly from a shrinking domestic labor supply…" http://www.spiegel.de/international/business/0,1518,502786,00.html

"…In Germany, according to a report published by consultancy McKinsey, those earning between 70 and 150 per cent of the average income… will make up less than half the population by 2020, against 54 per cent today. Only eight years ago, 62 per cent of Germans were in the middle-class bracket, according to a second study…" http://www.guardian.co.uk/world/2008/may/11/spain.france

Do you know what it means? Is the Fed defending the dollar or preparing to do so?

Thanks!