Many PMI Reports on First Business Day of the Third Quarter

July 3, 2017

Markets this Monday are reacting to many cross-currents.

  • The dollar has appreciated 0.3-0.5% against the yen, euro, Swissie, sterling, and Australian and and New Zealand currencies. It has risen more slightly versus the peso, yuan and loonie.
  • Aside from declines in Australia of 0.7% and New Zealand of 0.4%, equities are mostly higher. Indonesia’s bourse, which was shut all last week, rose 1.4%, and India’s market gained 1.0%. Having observed the 20th anniversary of Hong Kong’s return to China, stocks in the former British colony went up 0.5%, but Japan’s Nikkei edged just 0.1% higher after a surprisingly big defeat for the ruling Liberal Democratic Party in local Tokyo elections. The LDP lost 34 of the 57 assembly seats it had held previously.
  • European stock markets are up 1.6% in Italy, 1.0% in France and Spain, 0.7% in Switzerland, 0.6% in Germany and 0.4% in Britain.
  • WTI oil extended its streak of daily gains, firming 0.3% to $46.19 per barrel. Comex gold fell 0.7% to $1,233.60 per ounce.
  • The ten-year German bund yield slid two basis points, while its British and Japanese counterparts held steady.

The market is digesting many developments today. Tensions ahead of the G-20 summit are running high between U.S. President Trump and Asia. Trump is displeased over China’sĀ failure to control North Korea and a variety of trade imbalances with the region. A slew of released purchasing manager surveys point to even more robust growth in the euro area, Switzerland, and Australia but softer expansion in the U.K. and Japan. Inflationary pressures have eased, but Bundsbank President Weidmann made hawkish comments about facing policy normalization. The Bank of Japan released a robust quarterly corporate survey.

Euroland’s factory purchasing managers index rose 0.4 points to a 74-month high in June. Only Spain’s reading was lower than in May, and such still signified decent growth with a score of 54.7. Austria, Germany, The Netherlands, Ireland and Italy posted PMI readings of more than 55.0, and France’s was at 54.8. The Greek index move above the 50 no change level to 50.5, a 37-month high.

Elsewhere in Europe, the Norwegian PMI jumped 0.9 points to 55.0, best this year. The Swiss and Swedish readings were each above 60 at 60.1 and 62.4, respectively. The Polish PMI of 53.1 was 0.4 points higher than its score in May, and the Czech 56.4 reading matched the previous month’s score.

Manufacturing PMI surveys released on Asia produced the following results:

  • China’s 50.4 reading was 0.8 points better than the prior month and beat market expectations.
  • Japan scored a 52.4 PMI result, lowest in 3 months.
  • South Korea’s PMI climbed 0.9 to a 14-month high of 50.1.
  • The Vietnamese (52.4) and Taiwanese reading of 53.3 were at 2-month highs, and the Thai index edged above 50 to a 4-month high of 50.4.
  • however, Malaysia’s PMI dropped to a record low of 46.9. The Filipino PMI (53.9) was a 2-month low, and India’s index fell 0.7 points to a 4-month low of 50.9. Turkey’s factory PMI climbed 1.4 points to a 43-month high, but Indonesia’s index slipped below 50 for the first time since February.
  • Australia’s 55.0 reading was at a 2-month high, but Russia’s manufacturing PMI declined 2.1 points to an 11-month low of 50.3.

All the diffusion indices in the Bank of Japan corporate Tankan survey — that is for large, medium and small manufacturers and large, medium and small non-manufacturing firms — improved in June. Projected capital spending this fiscal year was revised higher, too.

Unemployment in the euro area remained at 9.3% overall and at 18.9% for young workers in May. German Bundesbank President Jens Weidmann urged his colleagues on the ECB Governing Council to face up to the need for policy normalization before it’s too late.

Swiss retail sales rose 0.3% on month but fell that amount on year in May.

The National Bank of Romania left its 1.75% key interest rate unchanged as expected.

Australian building approvals in May reversed a sharp rise in the prior month.

Thai consumer prices dipped less than 0.1% on year in June. In the same span, however, Indonesia consumer prices climbed 4.4%, and Turkey’s CPI inflation decelerated to 10.9% from 11.7% the month before. Lifted by lira depreciation, Turkish producer prices were 14.9% higher than in June 2016.

Still ahead: the U.S. manufacturing PMI. U.S. stock and Treasury market trading will stop at 13:00 EDT to start the Independence Day Holiday. Canada is shut today in observance of Canada Day. G-20 leaders hold their annual summit on Friday and Saturday in the host city of Hamburg, Germany.

Copyright 2017, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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