Surprisingly Strong European PMI-Manufacturing Readings

April 1, 2010

On this first day of the new quarter, which happens to also be Mourning Thursday and the day before the U.S. March jobs report, the dollar has eased 0.4% against sterling and the Canadian dollar but risen 0.7% relative to the kiwi.  The IMF called New Zealand’s currency 10-25% overvalued.  Other U.S. dollar movements are trivial: +0.1% against the euro and yen but down 0.1% versus the Australian dollar and Swiss franc.

Stocks are off to a great start in 2Q with gains of 1.4% in Japan, China and Hong Kong, 1.2% in Taiwan and France, 1.9% in Indonesia, 1.7% in Singapore, 0.9% in India and Germany, and 0.8% in Britain.

The ten-year JGB yield slid back four basis points to 1.36%, but the yield on German bunds rose 3 basis points.

Oil and gold prices climbed 0.6% and 0.2% to $84.48 per barrel and $1116.60 per ounce.

The Euroland PMI was revised to 56.6 from 56.3 reported initially and 54.2 in February.  The German PMI was revised from a flash reading of 59.6 to 60.2, best since April 2000.  Prior German readings were 57.2 in February, 53.7 in January, and 52.7 in December.  France’s PMI was revised to 56.5, best in 40 months, from 56.3 reported initially.

  • Italy’s index printed at 53.7 after 51.6 in February.  That was the highest since mid-2007.
  • The Dutch index climbed from 55.2 to 57.8, best since July 2007.
  • The Irish index printed at 53.0 after 48.9 and was the best since September 2007.
  • Even Spain’s reading surpassed 50 at 51.8 following 49.1 in February and 45.3, but analysts were cautioned that a sequence of above-50 readings would be needed to conclude the recession over.
  • Greece’s PMI reading of 42.9 following 44.2 in February and 48.6 in January reflected mounting fallout from that country’s debt crisis.

The British manufacturing PMI improved to 57.2, best since October 1994, from 56.5.  The output sub-index was the second highest score in this series.

The Swiss PMI jumped to 65.5 from 57.4.  Analysts had forecast a reading of 59.  Sweden’s index slid 0.4 to a still-lofty 61.1.  The Czech PMI advanced to 56.8 from 54.3, while Poland’s PMI edged up a tenth to 52.5. Russia’s PMI held steady at 50.2 near the breakeven point.

Australia’s PCI-manufacturing index reflected the rise in interest rates and a firm exchange rate, dropping to 50.2 from 53.8 in February.

China’s PMI improved to its third best score, 57.0, from 55.8 the month before.  Taiwan’s PMI was 62.7 after 62.5.  South Korea’s was 55.6, down from a 26-month high of 58.2 but still connoting briskly positive growth.  Turkey’s PMI increased 4.0 points to 54.9, but the South African index fell back to 55.6 after spiking to 60.4 in February from 53.6 in January.

The Bank of Japan released its quarterly corporate survey.  The so-called Tankan Report showed much better business conditions, although all results remained below zero (see my review in prior post).  Large manufacturers and large non-manufacturers each produced diffusion indices of minus 14.  Large manufacturing firms project rises in the coming fiscal year of 49.3% in earnings and 3.9% in sales, as well as a tiny 0.9% dip in capex after such plunged 30% last fiscal year.

Japanese auto sales were 37.0% greater than a year earlier in March following a 35.1% on-year rise in February.

German retail sales slid 0.4% in February and were 0.9% lower than a year earlier.  Like most recent months, this result was worse than forecast.

Australia reported a AUD 1.924 billion trade deficit in February.  Compared to January, when the deficit was just AUD 1.12 billion, exports fell 1.0% while imports rose 3.3%.

Consumer prices in South Korea increased 0.3% on month and 2.3% on year in March, less than forecast.  Core inflation eased to 1.5% from 1.9%.  South Korea’s trade surplus widened 5.5% in March to $2.19 billion.  Exports were 35.1% higher than a year earlier.  Thai consumer prices firmed 0.2% on month and 3.4% on year in March, but the core CPI was just 0.4%.  Indonesian consumer prices dipped 0.1% in March and rose 3.4% on year, each slightly less than forecast.

Italian hourly wages rose 2.1% in the year to February.

The Bank of England’s 1Q quarterly corporate credit survey was released, showing improvements in credit availability and the pace of mortgage defaults.

Scheduled U.S. data today include construction spending, auto sales, the manufacturing PMI index, and weekly jobless insurance claims.  Tomorrow is the biggie, the March employment report.  Analysts have scaled back forecasts of the growth in jobs following yesterday’s disappointing ADP data.  Forex volume will be thinning despite this event, as the Easter break is second only to the calendar yearend period in market closures.  On a personal note, yesterday marked 35 years since my first day at the New York Fed Foreign Department.  It was Easter Monday, and I can recall like it was yesterday the head trader saying relax kid, this is going to be among the quietest days you’ll ever see here.

Copyright Larry Greenberg 2010.  All rights reserved.  No secondary distribution without express permission.



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