Poor European PMI Results Reported as Markets Now Await U.S. Jobs Data

May 4, 2012

April purchasing managers readings strongly suggest the Euroland entered the second quarter still in recession.

Japan was closed for Greenery Day, another part of the Golden Week holidays.

Analysts are forecasting a 170K increase in U.S. non-farm payroll jobs and an unchanged 8.2% unemployment rate.  Figures are due at 08:30 EDT (12:30 GMT).

Beyond the U.S. labor force figures, investors await Sunday’s trio of European elections: round two of the French presidential vote, Greek parliamentary elections, and a German state election in Schleswig Holstein.

The Reserve Bank of Australia published its quarterly Monetary Policy Statement in which both growth and inflation forecasts were revised lower.

The dollar is little changed overnight, with gains of 0.2% against the euro and 0.1% versus the yen, Swissie, Australian dollar, and yuan, dips of 0.1% against the loonie and sterling, and no change versus the kiwi.

Share prices are down 0.8% in London and 0.6% in Frankfurt and Paris.  In the Pacific Rim, equities dropped 1.9% in India, 0.9% in New Zealand, 0.8% in Hong Kong, 0.7% in Australia and 0.3% in Singapore.

Oil sank 1.2% to $101.30 per barrel.  Gold prices dropped 0.3% to $1630.60 per troy ounce.

The yield on 10-year German bunds firmed by two basis points.

The service sector purchasing managers index for the euro area was revised to a 6-month low of 46.9 in April from a preliminary reading of 47.9 and a 49.2 score in March.  Such has been lower than the 50 no-change line every month so far this year and in 8 of the last 9 reported months.  Service PMI scores for individual countries using the euro were as follows:

  • Germany had a reading of 52.2 to go along with a 46.2 manufacturing PMI score reported earlier.
  • France joined Spain and Italy in recession with a reading of 45.2, sharply below the flash estimate of 46.5 and March’s 50.1 reading.
  • Spain’s 42.1 reading was the 10th sub-50 result in a row.  Jobs have been contracting for slightly over four years.
  • Service sector activity in Italy (42.3 in April) has been shrinking about as rapidly as in Spain.

Euroland’s composite manufacturing and services purchasing managers index printed at 46.7 in April, down from 49.1 in March, 49.3 in February, 50.4 in January and even below December’s 48.3 and November’s 47.0.  Euroland entered the second quarter with GDP seemingly shrinking at an annualized rate of about 2.0%.  The composite Italian PMI reading of 42.7 in April was at a three-year low.  France’s 45.9 was at a 6-month low.  Germany’s 50.5 hit a 5-month low, and Ireland’s 51.0 was a 3-month low.  Spain’s composite index of 42.0 was actually a 5-month high but nonetheless pointed to continuing deep recession.

In other reported purchasing manager surveys today,

  • China’s HSBC-calculated service sector index rose to a 6-month high of 54.1 from 53.3 in March.  A composite Chinese PMI of 51.4 after 49.9 in March suggests that China’s soft landing is stabilizing.
  • Hong Kong’s composite PMI was 50.3, down from 52.0 in March and dampened by soft export demand from mainland China.
  • Russia’s service-sector PMI printed lower at 52.6 after 54.4 in March 55.3 in February and 56.5 in January.  Indeed, such was the slowest rate of expansion since September 2010.  Russia’s composite PMI was at 53.4, a tad below March’s 53.6.
  • Mexico’s newly launched PMI manufacturing index touched a 1-year high of 56.3, 2.4 points better than in March.
  • Sweden’s service-sector PMI fell 4.0 points to 48.6, the first sub-50 reading since November.

Euro area retail sales rose 0.3% in March but were 0.2% lower than a year before.  Retail sales fell 0.5% in the first quarter or 1.8% at an annualized rate from 4Q11.

Irish industrial output fell 2.5% on month and 5.6% on year in March. 

New car sales in Britain were 3.3% higher than a year earlier in April.  Britain’s Halifax house price index fell 2.4% in April, reversing a 2.2% rise in March, and was 0.5% lower than a year before in the three months to April.

Swiss retail sales volume climbed 2.2% on month and 4.2% on year in March.  Norwegian unemployment held at 3.2%.

Consumer prices in the Philippines rose 0.8% in April and posted a larger 12-month increase of 3.0% after 2.6% in the year to March.

Australia’s central bank projects core inflation in fiscal 2011/12 of only 2.0% versus an estimate of 2.25% made three months ago.  Inflation is expected to remain in the targeted 2-3% range in the years to mid-2013 and mid-2014.  Real GDP is projected to advance 2.75% in the current financial year to mid-2012, 0.75 percentage points lower than the prior forecast.  Officials now think GDP will rise between 2.5% and 3.5% in the year to mid-2013 and 3-4% in the year to mid-2014.  Exports have performed more weakly than previously assumed, and wage pressure is subdued.  This forecast embodied in the quarterly Statement on Monetary Policy provides a framework for officials to run a growth-supporting policy.

Dudley of the Federal Reserve and German Finance Minister Schaeuble speak publicly today.  The main even is the U.S. Labor Department April jobs report.  Canada’s IVEY-PMI index will be released today as well.

Copyright 2012, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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