Europe Gets More Bad News
July 24, 2012
Flash purchasing manager estimates for Euroland in July were released, showing an unchanged composite score of 46.4, suggesting that GDP may contract by 0.6% in the third as well as second quarters of 2012.
The Moody’s rating agency lowered rating outlooks on Germany, the Netherlands, and Luxembourg to negative, citing a greater risk that Greece will leave Euroland and ensuing contagion.
The auctions of Spanish 3- and 6-month government paper fetched higher interest rates. Spain’s 10-year yield touched 7.57%, and Madrid’s IBEX index of share prices slumped by a further 2.6%.
The euro is weaker than $1.2100 and down 0.4% against the dollar from yesterday closing level. The dollar has also gained 0.4% against the Swiss franc and has edged up 0.1% versus the Australian dollar and sterling. The loonie is unchanged against the greenback ahead of today’s release of Canadian retail sales data. The yen has climbed 0.3% against the dollar. The kiwi is 0.1% firmer, and the yuan is steady.
The German Dax and Paris Cac are 0.3% lower. The British Ftse has edged down 0.1%. Earlier in the Pacific Rim, stocks fell 0.8% in Hong Kong, 0.4% in Indonesia, and 0.2% in Japan and Malaysia, but equities rose 0.5% in China and Singapore, 0.3% in South Korea, and 0.2% in India.
In response to the downgrades announced by Moody’s, 10-year sovereign debt yields rose by six basis points in Germany. Those in Britain and Japan are three bps and one basis point higher.
Oil prices are steady at $88.15 per barrel. Gold slipped 0.3% to $1575.50 per ounce.
China’s index of leading economic indicators firmed just 0.1%, its smallest advance in seven months. The HSBC flash manufacturing purchasing managers index for China printed at a 6-month high of 49.5 in July, up from 48.2 in June. Australia’s central bank staff assumes Chinese GDP will expand between 7% and 8% this year.
Euroland’s service-sector PMI score of 47.6 in July was 0.4 points above the street estimate and follows 47.1 in June and 46.7 in May. July’s reading was the best since 49.2 in March. However, the manufacturing PMI component sank a full point to 44.1, a 37-month low, and manufacturing output contracted at the fastest pace since May 2009.
Germany’s composite PMI fell by 0.8 points to a 37-month low of 47.3, providing further evidence that Euroland’s largest economy is in recession. The manufacturing PMI was 43.3, two points lower than assumed, and the services PMI reading of 49.7 was below 50 for a second straight month. One bright spot in the German data was the weakest input price pressure in 2-1/2 years. Germany’s index of leading economic indicators slid another 0.1% in May.
The French composite PMI of 48.0 moved above the German index to show a lesser rate of contraction. Such had printed in May at 44.6 versus a German score that month of 49.3. The French services PMI (50.2) was above the 50 no-change threshold for the first time since February. The manufacturing PMI for France fell to a 38-month low of 43.6, however, from 45.2 in June.
The French statistical agency, INSEE, released its measure of business sentiment, showing a drop to a 29-month low of 90 from a downwardly revised June reading of 91. In June 2011, such had crested at 109.
Czech overall economic sentiment worsened for a fourth consecutive time to a reading of negative 3.8 in July from minus 2.2 in June. The 2.3 reading on business sentiment was half as much as in June, whereas consumer confidence rose 0.8 points to a still very weak score of negative 28.3.
Spanish PPI inflation slowed unexpectedly to 2.5% in June from 3.2% in May. Finnish producer prices fell 0.7% on month and to a 12-month increase of just 0.5%. Moody’s left Finland’s credit rating unchanged, indicating less risk of contagion than for other core Ezone economies.
British mortgage approvals of 26,269 in June was the smallest level since the start of 2009 and well below the expected total.
Retail sales in Hungary dipped 0.1% in May and posted a 12-month 2.5% rate of decline.
Hong Kong’s trade deficit widened 25.7% on month to HKD 44.7 billion in June. Exports were 4.8% lower than a year earlier.
South Africa’s index of leading economic indicators dropped 1.1 points in May to 130.8.
Scheduled U.S. data today include the Richmond Fed manufacturing index, the preliminary manufacturing PMI survey, and the FHFA house price index, plus measures of weekly chain store sales. Fed Chairman Bernanke speaks publicly today. Greece’s international creditors are in country to assess compliance with promised austerity there. Hungary’s central bank is holding an interest rate policy meeting, at which policy is not expected to be changed.
Copyright 2012, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: 10-year German bunds, Dollar, foreign exchange, PMIs
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