Muted Market Response to PMI Data

August 1, 2012

Investors are marking time, looking past today’s data to the results of upcoming FOMC, ECB and Bank of England decisions.

The dollar is unchanged against the euro and Swiss franc, up 0.3% versus sterling and 0.1% against the yen and yuan, and off 0.4%, 0.2%, and 0.1% relative to the New Zealand, Australian and Canadian dollars.

Share prices were mixed in the Pacific Rim and Europe.  Equities closed up 1.1% in China, 0.5% in Singapore, and 0.1% in Hong Kong but down by 0.6% in Japan, 0.5% in Vietnam, 0.4% in New Zealand, 0.3% in Indonesia and 0.2% in Australia.  The Spanish IBEX slumped 1.5% amid some rigid remarks from German officials, but stocks are 0.8% higher in Britain and up 0.4% in France.  The German Dax has edged 0.1% lower.

Oil and gold prices firmed by 0.3% and 0.2% to $88.28 per barrel and $1618.10 per troy ounce.

Ten-year German bund and British gilt yields climbed five and two basis points.  A German auction of 5-year paper fetched a lower yield of 0.31%.

Switzerland was closed for a National Holiday.  Elsewhere it is PMI Day for manufacturing.

India suffered a major electricity blackout that left half the population in the dark.

Euroland’s July purchasing managers index printed at a 37-month low of 44.0, down from a flash estimate of 44.1 and 45.1 in both May and June.  Output and new orders contracted at a faster pace than in June.  The only bright spot among Ezone members was Ireland, whose PMI score climbed to 53.9 from 53.1 in June, 51.2 in May and 48.3 six months earlier in January.

The German PMI reading of 43.0 compared to a preliminary flash figure of 43.3 and 45.0 in June.  Input prices fell at the fastest rate since May 2009.

The French manufacturing PMI was 43.4, also below its flash indication of 43.6 but higher than the German reading.  This was the fifth straight score below the 50 no-change line and constitutes a 38-month low.

Italy’s 44.3 PMI also exceeded the German result but represents a three-month low.  Input price inflation is at a 3-year low.

Spain’s PMI rose 1.2 points to 42.3 in July.  Such a reading still connotes a very serious recession.

The Dutch PMI index of 48.9 matched June’s level and was the fifth straight sub-50 result.

The Greek PMI bounced to a two-month high of 41.9 from 40.1 in June and 43.1 in May.

Poland’s PMI improved to 49.7 in July from a 35-month low of 48.0 in June.  Input prices fell for the first time since July 2009.

The Czech PMI ticked up a tenth of a point to 49.5, reflecting a mild rate of manufacturing contraction.

Sweden’s PMI scored a 50.6, the first reading above 50 in three months.

Norway’s PMI, in contrast, held below the no-change threshold for a second consecutive month, printing at 48.7 versus 46.5 in June and 54.9 in May.

Reviews of Russia’s improved 52.0 PMI versus 51.0 in June accentuated the negative outlook given lower oil prices and Euroland’s continuing recession.

Britain’s purchasing managers index in manufacturing sank to a very depressed 45.4 in July from 48.4 in June, 45.9 in May and 50.5 in April.  This bad start to 3Q points to continuing recession.

Australia’s PMI survey was devastatingly poor, with an overall reading of 40.3, a three-year trough and down from 47.2 in June.

There are two Chinese PMI surveys, and they produced mixed manufacturing signals in July.  The HSBC PMI was revised to 49.3 from a flash 49.5 estimate and included the weakest jobs reading in 40 months.  However, the HSBC index was up from sub-49 scores in both May and June.  The government’s CFLP PMI index slid to an eight-month low of 50.1, in contrast.

India’s purchasing managers index fell to an eight-month low of 52.9, 2.1 points weaker than the June reading.  Export orders contracted.

Taiwan’s PMI fell 1.7 points to 47.5 in July.

The Vietnamese PMI fell to 43.6 from 46.6 in June, 48.3 in May and 49.5 in April.

Indonesia posted a manufacturing PMI score of 51.4 after 50.2 in June and 48.1 in May.  Orders were better.

Turkey’s PMI crossed over 50 to post a contractionary score of 49.4 following three straight readings above 50.  Subindices for production and orders were also below 50, whereas jobs showed continuing expansion.

South Africa’s PMI reading of 51.0 followed 48.2 in June and 53.6 in May.  The latest result was better than anticipated.

Britain’s Nationwide house price index slid 0.7% on month and 2.6% between July 2011 and July 2012.  Analysts had forecast a 2% on-year drop.  British shop prices were only 1.0% higher than a year earlier in July.  That was a two-year low.

Irish unemployment held at 14.8% in July.

Australian house prices rose 0.5% last quarter but were 2.1% lower than in 2Q11.  The Australian commodity price index posted on-year declines of 9.8% in SDR terms and 10.8% in local currency terms in July.

South Korea’s trade surplus was cut nearly in half to $2.75 billion last month as exports fell 8.8% compared to their July 2011 level.  South Korean CPI inflation slowed to a 12-year low of 1.5% from 2.2% in June, further adding to concern about the strength of that economy.  Core CPI inflation was just 1.2%.  Meanwhile, home prices dipped 0.1%, their first monthly drop in two years, and produced a 12-month increase of just 2.5%, lowest since the start of 2011.

On-year Japanese motor vehicle sales growth slowed to 36.1% in July from 40.9% in June.

India’s trade deficit narrowed 36.7% to $10.3 billion in June.  Indonesia recorded a $1.33 billion trade gap in June and on-year CPI inflation of 4.6% in July.  Core inflation was even higher at 5.9%. Thai CPI inflation picked up to 2.7% in July from 2.6% in June, with an unchanged core rate of 1.9%.  Producer prices in Thailand were unchanged on month and 0.7% above their July 2011 level.

The main U.S. event today will be the FOMC policy decision, to be announced at 14:15 local time (18:15 gmt).  No press conference afterward.  Scheduled U.S. data feature the ISM manufacturing PMI survey, the ADP estimate of private sector jobs, construction spending, and weekly mortgage applications and oil inventories.

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

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