More Signs of a Chinese Cool-Down

July 5, 2010

The U.S. market will be closed in observance of America’s 234th birthday.

Currency movements have been mild in the absence of U.S. leadership.  The dollar gained 0.4% overnight against sterling, 0.2% relative to the euro, Canadian dollar and Aussie dollar and 0.1% against the Chinese yuan.  The dollar also slid 0.1% against the yen, Swissy, and kiwi.

Stocks rose 1.5% in Taiwan, 0.7% in Japan, 0.6% in the Philippines, 0.3% in New Zealand, and 0.2% in Thailand and Indonesia.  Equities lost 0.9% in China, 0.8% in Sri Lanka, 0.6% in Malaysia, 0.4% in Australian, and 0.3% in Hong Kong.

The yields on ten-year German bunds and British gilts slid by two and three basis points.  That on JGBs edged two basis points higher.

Oil and gold prices firmed 0.3% and 0.2% to $72.36 per barrel and $1210.40 per ounce.

China’s purchasing managers index for the service sector fell 0.8 points to a 15-year low of 55.6 in June.  That PMI had been at 58.7 three months earlier.  China’s composite PMI was 52.2, down from 54.2 in May and 58.4 in March.  Chinese car sales were 10.9% higher than a year earlier in June after increasing 25% in the year to May.

Euroland real retail sales rose 0.2% in May, only about half as much as forecast, and were 0.3% lower in April-May than their 1Q10 average level.  The on-year increase in May was just 0.3%.

Swiss retail sales volume, in contrast, outperformed expectations with gains in May of 1.3% from April and 3.8% from May 2009.

The Sentix gauge of investor confidence in the euro area improved in July to minus 1.3 from from minus 4.1 in June.  Analysts expected the index to print at minus five.

Japan’s purchasing managers index in services softened to 47.1 in June from 47.5 in May, depressing the composite PMI below 50 for the first time in four months.  A composite index of 49.8 connotes a very mild rate of contraction.

Australia’s PMI-services firmed to 48.8 from 47.5 in May but remained below April’s 52.3.

India’s service-sector PMI score of 64.0 was at a two-year high and up sharply from 58.2 in May.

Hong Kong’s PMI-services slid to 52.6 from 53.2 in May.  The Russian PMI-services index was 55.4 in June, down from 55.9 in May and 56.9 in April.  It was also less than this index’s long-term average of 56.7.

Britain’s PMI-services index of 54.4 in June was a full point below May’s score and four points weaker than February’s three-year peak of 58.4.  June’s result was worse than forecast and the lowest score in ten months.  Business expectations suffered their greatest single-month drop in 14 years in response to the Conservative government’s harsh austerity proposals.

Director of the British National Institute of Economic and Social Research Martin Weale has been appointed to replace outgoing Kate Barker on the Bank of England’s Monetary Policy Committee.  He has a three year term.

ECB President Trichet endorsed regional fiscal austerity, sending bond yields and the euro slightly downward.

In Euroland, the composite PMI of 56.0 was unchanged from its preliminary “flash” indication and not far beneath April’s three-year high of 57.3.  Second-quarter economic growth will be strong, but the fading PMI scores indicate a loss of momentum heading into the third quarter.  The services PMI was 55.5, down from 56.2 in May and 55.6 in April.

  • Germany posted service and composite PMIs in June of 56.7 and 54.8.  The German scores in May had been 56.4 and 54.8.  The services index had a sub-50 indication for new orders.
  • France recorded service-sector and composite purchasing manager scores of 59.6 and 60.8 in June.  Such had peaked in April at 60.1 and 61.4.
  • Italy’s service-sector PMI reading in June was 51.5, down from 53.7 in May, 54.5 in April and 55.3 in March.  The rate of expansion was very slow last month.
  • Likewise, Spain’s reading was 51.8, down from 52.3 in May.
  • The Irish Services PMI, however, improved sharply to 55.4 — best since October 2007 — from 52.4 in May, 51.0 in April and 49.6 in March. 

Job ads in Australia rose 2.7% in June and 32.2% from a year earlier.  The TD-MI inflation measure for Australia showed on-year increases of 3.6% in June after 3.7% in May.  Both were well above the Reserve Bank of Australia’s 2-3% target range.

Turkish consumer prices slid 0.6% in June but were 8.4% greater than a year earlier.  The PPI fell 0.5% on month but rose 7.6% on year.

Copyright Larry Greenberg 2010.  All rights reserved.  No secondary distribution without express permission.

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