European April PMI Results Inspire New Wave of Investor Panic
April 23, 2012
European equities have plunged 3.2% in Sweden, 2.9% in Spain, 2.5% in Germany, 1.7% in France and 1.6% in Switzerland and Great Britain. In the Pacific Rim, there were some outsized drops in share prices such as 1.8% in Hong Kong, 1.6% in India and 1.1% in Singapore but also some smaller moves such as declines of 0.8% in China, 0.6% in Indonesia, 0.4% in Thailand, 0.3% in Australia and 0.2% in Japan.
Risk aversion sent 10-year German bund and British gilt yields down four basis points apiece and Japanese JGBs off two basis points.
The yen advanced 0.6% against the dollar, which otherwise shows gains of 0.8% against the Aussie and New Zealand dollars, 0.7% versus the Swiss franc, 0.5% relative to the euro, 0.4% versus the loonie and 0.2% against sterling. The yuan is unchanged.
Oil and gold prices dropped by 0.8% to $103.10 per barrel and $1634.10 per ounce.
The socialist candidate Hollande won the first round of French presidential elections with 28.6% of the vote. On May 6, he will face and likely beat incumbent Sarkozy, who got 27.1% of the vote in the first round. The far right Le Pen candidacy won 18.1%, a record high for the National Front.
ECB President Draghi and Bundesbank President Weidmann made hawkish remarks that central bankers have done as much as possible to give Euroland peripheral governments breathing space to enact fiscal cuts and other reforms.
The preliminary composite purchasing managers index for the euro area sank in April to a 5-month low of 47.4 from 49.1 in March and a first-quarter average reading of 49.6. Manufacturing printed at a 34-month low of 46.0 and 2.5 points below the 1Q12 average score, while services fell to 47.9, a 5-month trough, from 49.2 in March, 48.8 in February, and 50.4 in January. Production, demand and jobs all fell as the second quarter commenced. Weakness was felt by both Euroland’s core and its troubled peripheral economies.
The French service-sector PMI dived from 50.1 in March, which had connoted stagnation, to a 6-month low reading of 46.4 in April, implying significant contraction. The French manufacturing index went up 0.7 points but remained well below 50 at 47.3. And so the composite French index also lay under the 50 no change line at 46.8 following scores of 48.7 in March, 50.2 in February, 50.6 in January and 50.6 in December. Political uncertainty ahead of the elections had a pronounced dampening effect on spending by both households and businesses.
French business sentiment according to the government gauge fell back to 95.0 in April from 98.0 in March and 93.0 in February.
The German composite index of 50.9 in April barely surpassed 50. Such crested at 53.2 in February. Whereas the services component edged up a half-point to a 2-month high of 52.6, manufacturing slumped to a 33-month low of 46.3. Analysts had expected manufacturing to remain above 48, by contrast, and the manufacturing production index of 47.8 showed a two-month deterioration of 6.1 points.
Italian consumer confidence plunged 7.3 points in April to a reading of only 89.0. The Dutch government is gripped in crisis after the collapse of austerity negotiations.
The German index of leading economic indicators rose 0.4% in February, but much has changed since then. Swiss M3 growth ticked up to 6.6% in March from 6.4% in February. M1 advanced 10.6% on year, reflecting the Swiss National Bank’s efforts to cap the strength of the Swiss currency.
On Saturday, G20 central bankers and finance ministers affirmed an increase in IMF resources of more than $430 billion, but the United States will not be providing any of that incremental funding.
China’s HSBC-compiled purchasing managers manufacturing index climbed 0.8 points to a 3-month high of 49.1 in April. Being still below 50, this uptick is not seen impeding further monetary relief. Before the weekend, some analysts had predicted a reserve requirement drop by now, but such hasn’t occurred yet.
At the early April meeting of Australian monetary policy makers, a rate cut by May was said to hinge critically on inflation data. Producer prices in Australia did their part of the deal, falling for the first time in nine quarters. The PPI slipped 0.3%, reversing the prior quarter’s increase from 3Q11, and the on-year pace was halved to 1.4% from 2.9% in both 4Q11 and the first quarter of 2011.
Japan’s index of leading economic indicators rose 1.7 points in February to 96.3. The coincident and lagging indices advanced by 0.9 and 2.5 points, respectively.
Singapore’s 12-month pace of CPI inflation accelerated more than forecast to 5.2% in March from 4.6% in February. Singapore is the sole Asian central bank to tighten monetary policy recently. CPI inflation in Hong Kong edged back to 4.9% in March after falling from 6.1% in January to 4.7% in February.
No U.S. data releases are scheduled today. Mexico and Canada report wholesale sales. The FOMC meets tomorrow and Wednesday. An interest rate announcement later today will be made by the Bank of Israel.
Copyright 2012, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
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