Stocks and Bond Yields Lower, May Manufacturing PMIs Out, and Yet Another Trumpian Insult of a Foreign Politician

June 3, 2019

The dollar slid overnight by 0.4% against the kiwi, 0.3% versus the Swiss franc and Australian dollar, 0.2% vis-a-vis the loonie and 0.1% against the euro, while holding flat relative to the yen and sterling.

10-year sovereign debt yields slipped six basis points in Italy, 2 bps in France and the U.K. and a basis point in the United States.

Equities fell 1.2% in Australia, 0.9% in Japan, and 0.3% in China. European stock markets thus far have declined 0.4% in Spain, 0.3% in Italy and the U.K., 02% in Germany and 0.1% in France and Switzerland.

The price of WTI crude oil rebounded 1.4%, and Comex gold climbed 0.9%.

President Trump began European trip with a state visit to Great Britain from where he will go on to the 75th anniversary commemoration of D-day. Before landing, Trump called the Islamic mayor of London a loser, dumb and incompetent and also criticized the mayor’s height.

Euroland’s manufacturing purchasing managers index in May matched the preliminary estimate of 47.7. This 2-month low was the fourth straight sub-50 reading, indicating a deterioration of operating conditions, but there were some signs of stabilization such as less negative production growth and a pick-up in the orders to inventories ratio.

Individual reporting PMIs from the euro area ranged from a 3-month low of 54.2 recorded by Greece to a 2-month low of 44.3 in Germany. Austria’s PMI fell to a 50-month low of 47.8, while Italy’s rose to an 8-month high of 49.5. The Dutch and French PMIs were above 50 and better than April results. Spain’s 50.2 reading signified near stagnation and was at a 3-month low.

China’s manufacturing PMI matched April’s 2-month low of 50.2 reading, also implying a near stall.

Japan’s manufacturing PMI flipped from 50.2 in April to a 2-month low of 49.8 in May. Production expectations turned negative for the first time since late 2012.

India’s manufacturing PMI rebounded from an 8-month low of 51.8 in April to a 3-month high of 52.7 in May. Demand and output growth accelerated.

PMI readings slipped to 2-month lows of 52.0 in Vietnam, 48.4 in South Korea, and 48.8 in Malaysia. Although at a 2-month high, Taiwan’s manufacturing PMI (48.4) has now been below the 50 level, which separates improvement from deterioration, since last October. The Filipino PMI rose 0.3 points to a 2-month high of 51.2.

Two Australian manufacturing PMIs were reported. The AIG-compiled PMI dropped 2.1 points to a 2-month low of 52.7, while the CBA-compiled PMI rose 0.1 from a 3-year low of 50.9 in April to a 2-month high in May of 51.0.

British manufacturing was hammered by the failure of Brexit preparations and the U.S.-Sino trade dispute. The U.K. PMI sank in May to a 34-month low of 49.4. That’s the first sub-50 reading since July 2016 (the month following the infamous Brexit national referendum). The April PMI reading of 53.1 had been unexpectedly encouraging.

Switzerland’s manufacturing PMI edged up 0.1 point to a still-depressed 48.6 score after setting a 47-month low in April.

Sweden’s manufacturing purchasing managers index, by contrast, jumped 2.2 points to a 6-month high of 53.1, and Norway’s reading of 54.4 was the best in two months.

Russia’s manufacturing PMI slipped below the 50 level, dropping 2.0 points to a 9-month low of 49.8.

Elsewhere in Eastern Europe, Poland’s PMI reading (48.8) was the seventh straight sub-50 result and a 2-month low. The Czech PMI score (46.6) matched April’s 76-month low, representing a sixth month in a row of deteriorating manufacturing conditions.

Turkey’s manufacturing PMI fell 1.5 points to a 4-month low of 45.3, signifying sharp deterioration. This was the 14th sub-50 score in a row.

South Africa’s ABSA-compiled manufacturing PMI slid to a 3-month low of 45.4 in May from a 3-month high of 47.2 in the previous month.

Purchasing managers indices will also be reported today for the U.S., Mexico, Brazil and Canada.

In other data reported today, Turkish CPI inflation eased to a 9-month low but still painfully high 18.71% in May. That’s the fourth straight sub-20% 12-month rate of increase. CPI inflation crested at 25.24% last October, catapulted by massive lira depreciation. Turkish PPI inflation, which crested last September at 46.15%, fell in May to a 10-month low of 28.7%.

Producer prices in Hungary rose 1.0% on month in April and 4.1% on year, which is a 4-month high.

Swiss consumer price inflation dipped back to 0.6% in May. That’s the sixth straight month at either 0.6% or 0.7%. Core Swiss CPI inflation was also 0.6% in May.

Japanese capital spending last quarter was 6.1% greater than a year earlier. That’s above expectations and suggests that GDP growth in the quarter may get revised upward.

Australian corporate profits rose 1.7% on quarter and 8.8% on year in 1Q19.

On-year growth in Swedish retail sales accelerated in April to 3.9%, most in at least a year.

South Korea’s January-May trade surplus of $15.6 billion was 38% narrower than a year earlier. Malaysia’s year-to-April trade surplus of MYR 47.8 billion was similar in size to the surplus in the first four months of 2018.

Markets were closed today in Indonesia for the end of Ramadan and in New Zealand to observe the Queen’s birthday.

Copyright 2019, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

 

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