Tankan Survey, PMIs, Greece, and an Approaching U.S. Holiday

July 1, 2015

The dollar began the second half of 2015 on its front foot, firming 0.7% against the Swiss franc, 0.4% versus the yen, 0.3% relative to sterling, 0.2% vis-a-vis the loonie and euro and 0.1% against the Australian dollar. The yuan is unchanged, and the New Zealand dollar edged 0.1% higher against its U.S. counterpart.

In spite of a 4.9% plunge in China’s market, share prices are mostly higher.  In the Pacific Rim, stocks rose 1.8% in Hong Kong, 1.4% in New Zealand, 1.1% in South Korea, 1.0% in Australia, 0.9% in India, 0.6% in Taiwan and 0.5% in Japan.  In Europe, equities so far have risen by 2.9% in Italy, 2.5% in France, 2.3% in Germany, 1.8% in Spain, 1.3% in Switzerland, and 0.9% in Great Britain.

Greek markets remain shut.  Capital controls are in force, pending at least the result of Sunday’s referendum on Greece’s relationship with Europe.  Prime Minister Tsipras sent a letter to the troika of creditors, seemingly offering an olive branch to help find a settlement.  But the wording is vague, and other nations are skeptical, claiming that much has now changed since Greece failed to make its EUR 1.5 billion payment yesterday due the IMF.

Ten-year sovereign debt yields are up six basis points in the U.K., four bps in Japan and a basis point in Germany.  Futures point to a higher yield at the open in the 10-year U.S. Treasury.

Comex gold is steady at $1,172.34 per ounce.  West Texas Intermediate oil fell 1.3% to $58.69 per barrel.

The National Bank of Romania failed to cut its record low 1.75% interest rate further, surprising analysts who expected another 25-basis point reduction.  There have been four such cuts so far this year, most recently in early May, plus cuts totaling 125 bps in 2014, 125 bps in 2H13, 75 bps each in 2011 an 2012, 175 bps in 2010, and 225 basis points in 2009.

The Bank of Japan’s latest quarterly corporate survey, the so-called Tankan, reflects a brightening mood and is likely to solidify monetary policy resistance to increasing the pace of quantitative stimulus anytime soon.  The index readings for for large manufacturers (15) and large non-manufacturers (23) were higher than projected, and planned investment spending this fiscal year has been revised substantially upward.

Canadian markets are closed for Canada Day.

In advance of Friday’s holiday, several U.S. data releases are scheduled today — construction spending, auto sales, ADP’s estimate of private jobs growth, and the manufacturing PMI — followed tomorrow by weekly jobless claims, the Labor Department monthly labor force survey, and the New York area PMI known as the NAPM index.

June manufacturing purchasing managers survey results already have been reported today for many economies.

  • Euroland’s PMI printed at 52.5 for June, unchanged from its flash indication and the best score in 14 months.  The data imply GDP growth in 2Q15 around 0.3%.  Within the common currency area, The Netherlands recorded the best score, 56.2 which is an 18-month high.  Next best were Ireland (54.6 but a 16-month low) and Spain (54.5, a 2 month low), and Italy (54.1, also a 2-month low).  Germany’s 51.9, though at a 2-month high, was disappointing.  Austria’s 51.2 was a 14-month high.  The French reading was also at a 14-month high but, being just 50.7, connotes stabilization rather than much growth.  The Greek index fell 1.1 points to 46.9, a 2-month low, and no doubt would be much lower if the survey were taken today.
  • Three Chinese PMI surveys were reported, two by the government and one by HSBC.  The government’s manufacturing PMI was 50.2, same as in May and up from 50.1 in both March and April.  The government’s non-manufacturing survey improved to 53.8 in June from 53.2 in May, 53.4 in April, 53.7 in March and 53.9 in February.  HSBC’s manufacturing PMI was revised to 49.4, still a 3-month high despite being revised downward from 49.6.
  • Japan’s factory PMI of 50.1 was 0.8 points lower than the May reading despite improved export orders which hit an 18-month high.
  • South Korea’s PMI of 46.1 was the fourth straight month below the 50 no-change threshold and at a 33-month low.
  • Malaysia’s PMI dropped 1.9 points to a weak 47.6 reading.
  • Taiwan’s index of 46.3 was 3.0 points below May’s level and the third sub-50 score in a row.
  • The Vietnamese PMI of 52.2 in June was 2.6 points lower than in May and at a 3-month low.
  • Indonesia’s 47.8 score constituted a 3-month high but was below 50 for a ninth straight time.
  • India’s PMI slid 1.3 points to a 2-month low of 51.3, with growth in new orders slipping to a 9-month low.
  • Australia’s PMI plumbed lower to a 22-month trough of 44.2 from 52.3 in May.
  • Turning back to Europe, Britain scored a 51.4, 0.5 points less than the May reading and a 26-month low.  A strong sterling is hurting export demand.
  • The Swiss PMI rose 0.6 points to pull even with the no-change level of 50.0.  It hadn’t been that high since December.  The Swiss economy finally seems to have emerged from the shock of its January change in currency policy.
  • Sweden’s PMI sank 2.0 points to a 7-month low of 52.8.
  • Hungary’s 55.1 was at a 2-month low after 55.2 in May.\
  • Poland’s 54.3 in June was 1.9 points above May’s 7-month low of 52.4.
  • The Czech PMI of 56.9 was the 26th straight reading above 50 and signified the fastest growth in manufacturing since May 2014.
  • Turkey’s 49.0 reading was at a 2-month low.  Like many other PMI surveys released today, inflation particularly on inputs has risen.
  • Russia’s 48.7 PMI in manufacturing was down from 52.6 in May and at the same level as in April.
  • Norway’s index unexpectedly dropped 2.5 points to a paltry 44.0.  Norway has been hurt by the post-June 2014 slide in oil prices.

Australian building permits jumped 2.4% in May, twice as fast as forecast, and were 17.6% greater than in May 2014.

Indonesian consumer prices firmed 0.5% in June, posting a higher on-year advance of 7.26%.

In Thailand, consumer prices fell 1.2% in the year to June, while producer prices declined by 4.8%.

The South Korean CPI rate in June of 0.7% was less than 1.0% for the seventh month in a row.  South Korea’s trade surplus rose more than 60% on month to $10.25 billion in June.

Japanese motor vehicle sales were 5.4% higher than a year before in June.  That’s up from a 12-month 1.4% increase in May but similar to April’s 5.0% gain.

Copyright 2015, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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