Weaker Australian Dollar and Slump Continues in Chinese Share Prices

July 3, 2015

The Australian dollar tumbled 1.5% against its U.S. counterpart.  Australian retail sales grew by a smaller-than-forecast 0.3% in May following a downtick of 0.1% in April and a 0.2% rise in March.  On-year growth in retail sales remained at 4.4%.  Better news arrived from the Australian service-sector purchasing managers index, which increased 1.6 points to a 4-month high in June.  The data suggest slightly stronger growth in final domestic demand last quarter than in 1Q15.

Chinese share prices plunged another 5.4%.  The latest monetary easing by China’s central bank hasn’t gained traction yet.  HSBC reported a 1.7-point drop in China’s services purchasing managers index to a 5-month low of 51.8.  Orders grew at the slowest pace in 11 months.  China’s composite PMI fell by 0.6 points to a 13-month low of 50.6.  The government’s 7% GDP growth target for this year seems in jeopardy.

Currency trading today will lack the leadership of the U.S. market, which is closed for the observance of tomorrow’s Independence Day, which commemorates the 239th anniversary of the signing of the Declaration of Independence.  The dollar edged down 0.1% overnight against the euro, Swissie, yen and sterling and is 0.2% softer versus the Canadian dollar.  The kiwi slid 0.4%, and the yuan is steady.

In the Pacific Basin, stocks fell 1.3% in Hong Kong and 1.1% in Australia but rose 0.8% in Indonesia, 0.5% in Singapore and India, and 0.1% in Japan. 

Stocks in Europe have fallen 0.4% in France, Spain, and Switzerland and 0.3% in Italy.  The German Dax is so far unchanged on the day, and the British Ftse has risen by 0.5%.  The British service-sector purchasing managers index rose 2.0 points from May’s 5-month low to 58.5 in June, easily beating expectations and suggesting a post-election bump in activity.  The U.K. composite PMI score, a two-month high of 57.4, also exceeded street expectations.

Retail sales in the euro area rose marginally faster than forecast in May.  The volume of sales went up 0.2% following a 0.7% jump in April and were 2.4% greater than in May 2014.  Sales in April/May exceeded the first-quarter mean by 0.6%.

Oil is 0.7% softer at $56.54 per barrel, while gold has firmed 0.2% to $1,168.61 per troy ounce.

Ten-year sovereign debt yields have dipped three basis points in Japan and Britain, 2 bps in Spain, and one basis point in Germany, Portugal and Italy.  The uncertainty that is Greece does not appear to be causing havoc today.

Likewise, European service-sector purchasing manager surveys for June that were released today reflect surprisingly contained damage from the Greek debt crisis. 

  • Euroland’s composite and services PMI readings of 54.2 and 54.4 reflect the strongest positive growth since May 2011 and appear consistent with GDP growth last quarter of about 0.4%.
  • Composite PMIs among members of the eurozone rose to a 46-month high of 53.3 in France, a 12-month high of 54.0 in Italy, a 6-month peak of 60.9 in Ireland and a 2-month high of 53.7 in Germany.  Although at a 6-month low, Spain’s 55.8 score was still solid and accompanied by better price news.
  • Service-sector PMIs within Euroland were lead by Ireland’s 105-month high of 63.3, followed by Spain’s 56.1 (a 6-month low), France’s 54.1 (a 46-month high), Germany’s 2-month high of 53.8, and Italy’s 12-month high of 53.4.

Japan’s service-sector purchasing managers index increased 0.3 points to a nine-month high of 51.8.  Orders, input prices and employment each improved.  Japan’s composite PMI nonetheless dipped 0.1 point to a 2-month low of 51.5.

India, like China, recorded disappointing PMI survey findings.  The services PMI in India sank 1.9 points to a 15-month low of 47.7.  The composite PMI of 49.2 slipped under the 50 expansion or contraction line of demarcation, dropping by 2.0 points to 49.2.

Russia’s composite and service-sector PMI readings in June were both at 49.5, representing the worst results since March.

South Africa’s private purchasing managers index fell by 0.9 points to an 11-month low of 49.2.  Orders and production were also at 11-month lows.

Lebanon’s private PMI rose 1.3 points to a 5-month high in June but like all prior readings this year was below 50 at 49.3.

Singapore’s private PMI rose 1.6 points to a score of 51.1, the first above-50 reading since March.

Turkish CPI inflation decelerated to 7.2% last month from 8.1% in May, while PPI inflation edged up 0.2 percentage points to 6.74%.

The Czech trade surplus narrowed 10% on month to CZK 17.29 billion in May.  Hungary’s trade surplus widened 20% in April to EUR 2.984 billion.  And Malaysia’s trade surplus of MYR 5.51 billion was 20% smaller in May than April’s surplus.

The South Korean government proposed a fiscal stimulus package to counterbalance the drag from the MERS outbreak in that country.

This weekend, all eyes will be on the Greek referendum.  For investors, this vote constitutes an answer to should the country stay in the monetary union or leave it, but the Tsipras government sees it differently.

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

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