Stocks, Bond Yields and Euro Slide Again

June 1, 2012

The German Dax and Paris Cac have traded 2.2% and 1.5% lower, while the British Ftse is off 0.8%.  Japan’s Nikkei closed 1.2% weaker.  Share prices also fell by 2.7% in Taiwan, 1.6% in India, 1.0% in New Zealand and Singapore, 0.9% in Indonesia, 0.6% in The Philippines, and 0.5% in Malaysia and South Korea.

China’s weaker PMIs scores in May have generated new fear.  The Chinese CFLB government-authorized purchasing managers index in manufacturing printed at 50.4, down 2.9 points from April and signifying only marginal growth.  Such was the lowest reading so far in 2012.  The revised HSBC PMI index for China of 48.4 indicates contraction at a faster pace than the flash estimate of 48.7 had implied.  April’s score was 49.3.

The dollar has climbed overnight by 0.9% against the Aussie dollar, 0.7% versus sterling, 0.6% relative to the loonie, 0.5% against the kiwi, 0.3% against the euro and 0.2% relative to the Swiss franc.  The yen is 0.3% stronger against the dollar and up 0.6% relative to the euro.  The yuan is unchanged.

The ten-year British gilt and German bund yields fell by six and four basis points.

Oil slumped another 2.0% to $84.84 per barrel.  Gold slid 0.7% to $1553.70 per ounce.

Unemployment in the euro area remained at a record high of 11.0% in April, 1.1 percentage points higher than a year earlier.  Joblessness of 24.3% in Spain, 15.2% in Portugal, 14.2% in Ireland, and 10.2% in Italy and France towered over Germany’s 5.4% level.

The volume of Swiss retail sales slumped 1.7% on month and was merely 0.1% above a year earlier.  Analysts had projected on-year growth of about 5%.

European manufacturing PMI survey results were also bleak for the most part.

  • Euroland’s 45.1 reading in May was revised up from a 45.0 flash estimate but still seems to imply negative growth of around 2.0% annualized in 2Q.  45.1 represents a 35-month low and compares to 45.9 in April.  Within the common currency area, Germany scored a 45.2, down 1.0 from April and at a 35-month low.  The French 44.7 reading was the lowest since May 2009 and 2.2 points less than in April.  Italy’s 44.8 reading was a point better than April’s six-month low, but Spain’s 42.0 was 1.5 points worse than the month before and at a 36-month trough.  The Greek PMI improved 2.4 points to an 8-month high but remained very depressed at 43.1.  The Dutch PMI fell 1.4 points to 47.6.  Ireland’s 51.2 score showed modestly expanding activity and represents a two-month high.  Austria’s 50.2 constitutes a 5-month low.
  • Poland’s PMI fell 0.3 to 48.9, weakest since December.
  • The Czech PMI sagged 2.3 points to 47.6.
  • Britain’s PMI provided one of the biggest disappointments and seemingly will prod Bank of England officials to reconsider expanding its asset buying program.  The U.K. manufacturing PMI fell to 45.9 from 50.2 in April.  New orders fell at the fastest pace since March 2009.
  • Russia’s PMI improved from 52.9 in April to 53.2 in May.
  • Sweden scored a 49.0, 1.2 points lower than in April.
  • Denmark’s 54.3 reading was 8.8 points below the upwardly revised April level.
  • The Swiss PMI reading of 45.4 after 46.9 was the lowest score since July 2009 and along with Switzerland’s retail sales data (see above) depicted an economy that is struggling.
  • Norway’s 54.9 was 1.3 points better than the April level.

Australia’s AIG performance of manufacturing index worsened to 42.4 in May from 43.9. 

India’s PMI survey exhibited resilience.  The overall reading of 54.8 was just 0.1 point less than in April, and both output and orders expanded solidly.

Turkey’s PMI, on the other hand, reflected near stagnation with an overall 50.2 reading after 52.3 in April.  Orders contracted.

The South Korean PMI dropped 0.9 points to 51.0.  Vietnamese manufacturing contracted more rapidly than in April, as its index fell 1.2 points further below the 50 no-change line to 48.3.  Taiwan’s PMI dropped 0.7 points to 50.5.  Indonesia’s 48.1 score was less than the 50.5 April reading.

Consumer prices in South Korea rose 0.2% on month and by an unchanged 2.5% on year in May.  Core inflation stayed at 1.6%.  Indonesian CPI inflation edged marginally lower to 4.45% in May.  Thai CPI inflation was steady at 2.5% last month. 

Japan’s Ministry of Finance reported that business investment climbed by a greater-than-assumed 3.3% between 1Q11 and 1Q12.  All other things being the same, this implies an upward revision in estimated first-quarter GDP growth.

New Zealand’s terms of trade (export/import price ratio) fell by 2.3% last quarter.  Export prices dropped 3.8%, more than twice as fast as the fall in import prices.  New Zealand commodity prices fell 4.2% on month in May, their twelfth decline in 13 months.  Australia’s commodity price index express in SDRs was 9.9% lower in May than a year before.

Scheduled U.S. data releases today feature the monthly Labor Department jobs report, personal income and spending, construction spending, the ISM purchasing managers index, and auto sales.  Quarterly and monthly Canadian GDP figures get released, too.

Copyright 2012, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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