Awaiting Outcome of G7 Finance Ministers Conference Call
June 5, 2012
At this hour, top treasury officials from the Group of Seven nations (U.S., Japan, Germany, France, Italy, Canada, and Britain) are holding an emergency phone conference to discuss the euro crisis and Spanish banking system. Some kind of statement seems likely to be released.
U.K. markets remain closed for the Queen’s diamond jubilee celebration.
On the hope that some concrete action will be taken, share prices rose mostly in the Pacific Rim. Such climbed by 1.7% in Indonesia, 1.5% in Taiwan and Australia, 1.1% in Vietnam and South Korea, and 1.0% in Japan. Stocks were unchanged in China, up just 0.2% in India and down 0.9% in New Zealand. In Europe, the German Dax has lost 0.8%, hurt by weaker-than-expected German orders figures. The Paris Cac and Spanish IBEX show gains of 0.6% and 0.4%.
The dollar rose overnight by 0.4% against the euro, Swissie, and kiwi, 0.2% against sterling, and 0.1% versus the loonie and yuan. The greenback is 0.2% lower against the yen and off 0.1% relative to the Aussie dollar.
The Reserve Bank of Australia cut its Official Cash Rate by 25 basis points to 3.5%, bringing the reduction to 125 bps since November. The Bank of Canada is scheduled to make an interest rate announcement at 13:00 GMT.
The 10-year German bund yield fell by 4 basis points to 1.17%. Its Japanese counterpart went up 4 bps to 0.86%.
Gold is 0.4% higher at $1619.70 per ounce. Oil slid 0.2% to $83.85 per barrel.
German industrial orders sank 1.9% in April, roughly twice as much as forecast, and were 3.8% below the year-earlier level.
Service sector purchasing manager survey results for May have been released for a number of countries.
- Australia’s services PMI index recovered partly to 43.5 after plunging to 39.6 in April from 47.0 in March. This was the fourth sub-50 result in a row. When PMI readings are less than 50, it means activity is contracting.
- Japan’s service PMI score of 49.8 was the lowest since September and down from 51.0 in April and 53.7 in March. The composite Japanese PMI reading for both manufacturing and non-manufacturing activity printed in May at 50.1, down from 51.3 in April and 53.2 in March and at its lowest level since December.
- China’s HSBC service sector PMI improved to a 19-month high of 54.7 from 54.1 in April and 53.3. Such helped to lift the composite reading to 51.9 from 51.4 in April and 49.9 in March. These improvements contrast with the CFLP PMI data released earlier. China has two sets of purchasing managers data.
- India’s service-sector PMI climbed 1.9 points to 54.7, best since February, and such included a 15-month high in business confidence. India’s composite PMI rose 1.5 points to a reading of 55.3.
- The United Arab Emirates PMI went up 0.5 points to 53.8, an 11-month high, reflecting strengthening sales volume.
- Russia had a good report, too, but it was tainted by the recent sharp fall in world oil prices that points to deterioration ahead. The Russian services PMI improved from a 19-month low of 52.6 in April to 54.9 in May, and the Russian composite PMI advanced by 1.1 points to 54.5, a 6-month high.
- Euroland’s services PMI was revised to 46.7 from a flash estimate of 46.5 and an April reading of 46.9. This was the fourth sub-50 score in a row and helped depress the composite PMI for the euro area to 46.0 from 46.7 in April, 49.1 in March, and 49.3 in February. The 46.0 composite PMI score reflected the sharpest rate of contraction since mid-2009, suggesting that GDP in the current quarter will post an annualized drop of at least 2.0%.
- Germany’s PMI services index of 51.8 was down from 52.2 in April. Germany’s composite score of 49.3 was below 50 for the first time since November and suggests that GDP will show flat growth this quarter.
- France’s PMI services index of 45.1 was at a 7-month low. The composite French reading of 44.6 was at a 37-month low and suggests that GDP growth will be negative in 2Q.
- Italy’s services PMI rebounded 1.5 points to 42.8 from a 34-month low in April but was below the 1Q12 mean score of 44.4.
- Spain’s services PMI registered a score of 41.8 after 42.1 in April and 46.3 in March. There’s no light at the end of the Spanish and Italian tunnels. The composite PMI readings in those economies were respectively at 41.2 and 43.5 in May.
- The Swedish service sector PMI showed a faster rate of contraction with a reading of 47.7, down 0.9 points from April.
The retail sales report from Euroland was yet another stinker, falling by 1.0% on month and 2.5% in the year to April. Analysts had predicted declines of 0.1% on month and 1.0% on year. April sales were already 0.8% weaker than their 1Q average level.
Czech retail sales fell 2.1% on month and by 4.1% on year in April.
Hong Kong posted a composite purchasing managers index of 49.4 in May, the first sub-50 score since December and down from 50.3 in April. Taiwanese consumer and wholesale prices respectively posted 12-month changes in May of +1.7% and minus 0.6%. Thai consumer confidence slid to a reading in May of 67.1 from 67.5 in April.
Australia’s current account deficit in the first quarter totaled A$ 14.89 billion, 54.5% wider than in 4Q11.
The Presidents of the Dallas, St. Louis, and Chicago Federal Reserve Banks speak publicly today.
The U.S. service sector PMI report is due at 14:00 GMT. Weekly chain store data also arrive today. Canada releases building permits, and the Bank of Canada is not expected to change its overnight money target, which has been at 1.0% since September 2010. The ECB Governing Council’s monthly policy meeting is set for tomorrow, and the Bank of England will make its policy announcement on Thursday.
Copyright 2012, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Dollar, Euro, foreign exchange, G7 finance ministers, purchasing managers survey
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