Another Wave of Risk Aversion Hits All Markets
June 1, 2010
The dollar advanced 1.6% against the Australian dollar, 1.3% versus the euro and Swissy, 1.1% against the kiwi, and 0.7% relative to the Canadian dollar. The dollar has only edged 0.1% higher against sterling and has lost 0.4% to the yen. Rumors of more sovereign debt downgrades have surfaced. Concern about the catastrophic ecological disaster in the Gulf of Mexico is another negative as a new month begins.
Equities were hammered, loosing 2.6% in Indonesia, 2.2% in India, 1.4% in Hong Kong, 1.2% in Taiwan, 1.4% in Singapore, 1.3% in Thailand, 1.1% in China and 0.6% in Japan. Selling intensity picked up in Europe, where stocks have fallen 2.9% in Spain, 2.4% in France, 2.1% in Great Britain and 1.7% in Germany.
German ten-year bund yields fell 5 basis points, and gilts and JGBs lost two basis points apiece.
Oil prices sank 2.6% to $72.07 per barrel. Gold prices rose 0.7%.
The Reserve Bank of Australia left its Official Cash Rate at 4.5% as expected, citing concern over the European debt crisis. Some doubts have arisen over whether the Bank of Canada will hike its 0.25% overnight money rate target. Officials had strongly hinted such will be done today.
Australian building permits sank 14.8% in April, cutting their on-year increase to 21.3% from 51.6% in March.
May manufacturing purchasing managers index readings were released for many countries today.
- Australia’s reading of 56.3 was down from 59.8 in April. Despite the 3.5-point drop, the level connotes continuing brisk activity.
- Euroland’s reading was 55.8, a tenth less than the flash indication and 1.8 points less than April’s 47-month high of 57.6. Input price pressures were their most severe since July 2008. The growth rates of orders and output slowed sharply.
- Greece is experiencing a double-dip recession, and the second leg is as severe as the first one. It’s PMI printed at 41.3, lowest since April 2008 after a score of 43.6 in April and 48.8 last December.
- The German PMI was 58.4 versus 61.6 in April. Among Euroland’s major economies, Germany experienced the biggest deterioration but still had the best score.
- The French PMI dipped 0.8 points to 55.8. Widespread inventory shortages were reported.
- Italy’s PMI of 54.0 showed resilience, being just 0.3 points lower than April’s 54.3 reading.
- Spain had experienced an encouraging 1.5 point improvement in April, but the PMI fell back 1.8 points to 51.5 in May amid signs of floundering consumer confidence.
- The Irish PMI bucked the trend of most economies, rising to 54.1 from 53.4 in April, 51.8 in March and 49.1 in February.
- The Dutch PMI slid 0.4 points to 56.5. Orders were at an 11-month high.
- The British PMI held steady at 58.0, the best score since September 1994 and suggesting that the production component of GDP will expand 1.2% or faster in the second quarter. One concern, however, has to be the impact of coming fiscal austerity.
- The Czech PMI reading of 57.6 was up 0.3 points and the highest since August 2007.
- Poland’s PMI of 52.2 was not far off the 25-month high of 52.5 in both March and April.
- Hungary’s PMI slid below the 50 expansion-or-contraction line of separation for the first time since end-2009 to a reading of 49.6. Such had peaked in February at 55.9.
- Russia’s index of 52.0 was a tenth below April’s 23-month high.
- The Swiss PMI rose a half-point to 66.4 and was 12.7 points greater than its value in December.
- The Swedish PMI also surprised on the upside with a reading of 66.0 after 64.0 in April and 61.1 in March.
- Denmark’s PMI fell 3.1 points to 48.5. Norway’s PMI slipped to 50.1 from 51.9 in April.
- South Africa’s PMI dropped 4.1 points to 51.1.
- Taiwan’s reading of 57.4 was 3.3 points less than in April and off 5.3 from March. Growth is solid but not as hot as earlier this year.
- South Korea’s PMI dropped to 54.6 from 57.1 in April. February saw a 26-month peak of 58.2 in South Korea.
- China’s PMI sank to an 11-month low of 52.7 from 55.2 in April and 57.4 in January. Price pressure seems to be lessening in response to tighter policies.
- India’s PMI, on the other hand, jumped another 1.8 points to 59.0, easily surpassing its long-term average value of 55.9 and reaching a 27-month peak.
- Turkey’s PMI rose 0.5 points to a solid 56.5 reading, as both output and orders hit survey record highs.
Japanese motor vehicle sales were 28% greater than a year earlier in May.
South Korean consumer price inflation ticked up a tenth in May to 2.7%. Core CPI rose to 1.6% from 1.5%. Inflation remains in the Bank of Korea’s 2-4% target band. Retail sales in Hong Kong were 12.4% greater in April in volume terms than a year before.
French producer prices surpassed expectations in April with gains of 1.0% from March and 4.0% from April 2009.
Euroland unemployment ticked up a tenth in April to 10.1%. Such was at 9.2% a year earlier. Youth unemployment was at a painful 20.0% level versus 19.3% in April 2009. Italy’s jobless rate was the highest since December 2001.
Germany’s labor market report for May again exceeded optimistic expectations. Unemployment fell by 45K on top of April’s 67K decline. The rate of joblessness slid to 7.7% from 7.8%. Job vacancies rose 5K to 514K. German retail sales volume recovered 1.0% in April as forecast but was 3.1% less than a year earlier. Sales in January-through-April were 1.1% lower than a year earlier.
Scheduled U.S. data today include the manufacturing purchasing managers index, the Dallas Fed index, and construction spending. The Bank of Canada’s rate announcement will be made at 13:00 GMT. The target of 0.25% on overnight money has prevailed since April 2009, but economic data and rhetoric from officials suggest that trough ends today.
Copyright Larry Greenberg 2010. All rights reserved. No secondary distribution without express permission.
Tags: PMIs
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