New Overnight Developments Abroad: Service PMI Readings Released

July 3, 2009

Commodity-sensitive currencies are higher.  The U.S. dollar lost 0.5% against the kiwi and 0.3% against the Canadian and Australian currencies.

The dollar otherwise rose 0.5% against sterling and 0.4% against the Swiss franc, which continues to be rattled by the threat of Swiss intervention.  The dollar edged up less (0.1%) against the yen and euro.

Stocks remain on their back foot.  Equities lost ground in Japan (0.6%), Australia (1.3%), Singapore (0.9%), Thailand (0.5%) and Malaysia (0.6%) and are down 0.4% in France and 0.1% in Germany.

The yield on 10-year Japanese JGB’s settled back 3 basis points to 1.33%.  10-year bunds are unchanged, while the gilt yield firmed a basis point.

Oil ($66.03/barrel) and gold ($932.60 per ounce) are generally steady.

Much of the United States will be closed today in observance of Independence Day.

The Australian PSI index for services leaped to 50.2 in June from 39.9 in May.  Such was the first reading to indicate actual expansion in 15 months.  The sales and orders sub-indices were also above 50 at 55.2 and 51.5, respectively.

The U.K. PMI-services index surpassed 50 for a second straight month in a further indication that positive growth may be around the corner.  The print was 51.6 after 51.7 in May.  The composite PMI, which also encompasses manufacturing, firmed to 51.0 in June from 50.4 in May.

Euroland’s composite and service PMI readings were revised slightly above their preliminary readings.  The composite index in June was 44.6 versus a 44.4 flash indication and 44.0 in May.  The services index printed at 44.7 against a flash of 44.5 and a May reading of 44.8.  As indicated when the flash figures were announced on June 23rd, these results suggest that real GDP likely contracted about 0.5-0.6% last quarter and that the trend toward a lessening recessionary tendency stalled or consolidated in the final month of the quarter.  Within services, orders were still below 50 but recorded the best reading since last October and an increase for the fourth straight time.  The jobs sub-index likewise was below 50 but higher for a fourth straight month.

Individual PMI-service readings in Europe were as follows:

  • Germany: Composite 44.0, unchanged from May.  Services 45.2, also the same as in May.
  • France: Composite 47.8 after 46.6.  Services 47.2, down from 48.3 in May.
  • Italy: Services 42.3, down from 43.1 and the first setback since February’s trough.
  • Spain: Services: 41.2, up from 39.1 but still connoting a deep recession.
  • Ireland: Services 42.3, up from 39.5 and see comment for Spain.
  • Russia: Services 49.7, up from 46.6 and poised to return to positive growth.

Retail sales in Euroland fell 0.4% on a volume basis in May and by 3.3% from a year earlier.  Analysts had expected smaller declines in both monthly and on-year terms.  The 0.4% drop was the worst result since February and left the April-May level 0.4% below the 1Q level.  Retail sales had declined 0.9% in 1Q or 3.7% at an annualized rate.

The Bank of England reported a Gbp 8.1 billion net housing equity repayment in the first quarter, which was similar to the 4Q08 result.

Bank Indonesia cut its key policy rate to 6.75% from 7.0% as widely anticipated but indicated limited scope for further rate reductions.

Japan’s services PMI ticked up to 42.6 in June from 41.1 in May.  That’s still a very depressed reading despite an above-50 score for business expectations.  Japan’s composite PMI improved to 44.6 from 42.9.

Copyright Larry Greenberg 2009.  All rights reserved.  No secondary distribution without express permission.

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