Disappointments

June 5, 2013

Japanese Prime Minister Abe’s proposed deregulations lacked urgency and left investors uninspired.

Australian GDP growth of 0.6% in the first quarter was slightly shy of expectations.  Investment fell 0.8%.  On-year GDP growth slowed 0.6 percentage points to 2.5%.

Australia’s service-sector purchasing managers index fell 3.5 points to a 13-month low of 40.6.  That’s nine full points lower than the March reading.

On-year Ezone GDP growth of negative 1.1% was a tenth percentage point worse than the preliminary estimate.  The quarterly contraction of 0.2% (0.9% annualized) was unchanged.  Between 4Q12 and 1Q13, personal consumption ticked up 0.1%, while government spending slid 0.1%.  Net exports exerted a 0.1 percentage point drag on growth.  Business spending fell by 1.6%.  Among individual members of the currency union, GDP in the year to 1Q fell by 5.3% in Greece, 4.0% in Portugal, 4.1% in Cyprus, 2.3% in Italy, 2.0% in Spain and Finland, 1.3% in the Netherlands, 0.4% in France, and 0.3% in Germany.

Retail sales in the euro area dropped 0.5% in April and by 1.1% from a year earlier in volume terms.  Food slumped 2.0% on month, whereas other retail sales rose by 0.6%.  Sales were 0.8% weaker than the first-quarter average level.

Russia’s service-sector and composite purchasing managers indices fell to 33-month lows of 51.4 and 51.0 from April scores of 53.0 and 52.4.

Hong Kong’s private PMI index was below the 50 no-change threshold for a second straight month and, at 49.8, its lowest value since September.

In China, the HSBC service-sector and composite PMI scores of 51.2 and 50.9 in May constitutes 3-month and 7-month lows, suggesting moderate expansion only.

The Ezone services PMI was revised lower to 47.2 in May from a flash estimate of 47.5.  The composite PMI reading of 47.7 was unchanged and,along with an April reading of 46.9 suggests that GDP will have contracted in 2Q for a seventh straight quarter and by about the same rate as the 0.9% annualized drop in the first quarter. 

British shop prices in May posted their first on-year decline, albeit of just 0.1%, since September 2009.  That followed a 0.4% increase in the year to April according to the British Retail Consortium.

Czech retail sales fell 1.6% on month and by a working day-adjusted 0.2% on year in April.

New Zealand commodity prices dropped 1.6% on month in May.

Robert Kennedy was shot by Sirhan Sirhan 45 years ago tonight right after winning the California primary.

It’s been another difficult day for share prices.  Japan’s Nikkei slumped 3.8% and closed barely above 13K and down 15.4% since May 21.  Stocks also fell 1.7% in the Philippines, 1.5% in Singapore and South Korea, 1.3% in Australia, 1.0% in Hong Kong and 0.5% in New Zealand.  China (-0.2%) and India (+0.1%) had comparatively stable trading sessions, but European markets are lower, with declines so far of 1.5% in the British Ftse, 1.3% in the Paris Cac and 1.2% in the German Dax.

The U.S. dollar has strengthened 0.9% against the Australian dollar and 0.3% versus the kiwi, but it is down 0.5% versus the yen and 0.3% relative to the pound.  The Swiss franc and Chinese yuan are unchanged.  The dollar has edged up 0.1% against the loonie and euro.

The 10-year Japanese JGB yield settled back three basis points to 0.85%, while the German bund has dipped one basis point.

WTI oil prices firmed 0.4% to $93.64 per barrel.  Gold slid 0.1% to $1395.80.

A piece of good news came from the British service-sector purchasing managers index, which surpassed 50 for a fifth straight month and reached a 14-month high of 54.9 after 52.9 in April.  This improvement and above-50 readings on the construction and manufacturing PMIs reported earlier remove any realistic chance that Bank of England quantitative easing might be resumed.

Within Euroland, Spain’s PMI of 47.3 in services was 2.9 points better than the April reading and the best since mid-2011.  Italy’s 46.5 reading was down 0.5 points from April’s 20-month high.  Germany’s services PMI was revised down to 49.7 from a preliminary 49.8 estimate and was the second sub-50 month in a row.  The French PMI remained at 44.3, conveying significant contraction and the likelihood of negative GDP growth this quarter.

Taiwanese CPI inflation slowed to 0.7% in May, and wholesale prices posted a 3.3% 12-month decline.  Filipino CPI inflation remained at 2.6%.

The U.S. Beige Book of regional economic conditions will be released today by the Federal Reserve.  There are several other U.S. statistics arriving: quarterly unit labor costs and productivity growth, the ADP estimate of private sector employment, the service-sector PMI survey, and factory orders.  Canadian building permits are due, too.

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