European Stocks Up after Release of Manufacturing PMIs

October 1, 2012

Share prices have thus far risen 1.6% in Italy, 1.4% in France, 1.3% in Germany, 1.1% in the U.K. and 0.9% in Spain.  In the Pacific Rim, by contrast, equities fell 0.8% in Japan, 0.7% in the Philippines, 0.5% in Taiwan, and 0.1% in New Zealand and Singapore.

Chinese markets will be closed all week for a National Holiday commemorating the founding of the People’s Republic in 1949.  Hong Kong was closed today, too, and parts of Australia (the Capital Territory, New South Wales, and South Australia) are celebrating Labour Day.

The dollar has dipped 0.3% against the euro, 0.2% versus the Swiss franc, and 0.1% relative to the kiwi.  The greenback shows no change against the yuan, loonie, yen or sterling, and it is up 0.1% against the Australian dollar.

Oil and gold prices have eased by 0.6% to $91.62 per barrel and 0.3% to $1769.30 per ounce.

Yields on 10-year German bunds and British gilts are three and two basis points higher, but the Japanese JGB has edged down a basis point to 0.77%.  Peripheral sovereign bond yields are generally lower.

Euroland’s manufacturing purchasing managers index (PMI) printed at 46.1 in September, 0.1 points above the preliminary indication and up from 45.1 in August and 44.0.  The 3Q average score of 45.1 was the lowest since 2Q09 and suggests sub-zero GDP growth in the quarter.  Within the common currency area,

  • The German PMI (47.4) touched a 6-month high and was 2.7 points better than in August.  Being below 50, however, implies a contraction in manufacturing.
  • The French PMI (42.7) indicated the fastest contraction since April 2009 and was 3.3 points below August’s reading.
  • Italy’s score of 45.7 was at a 6-month high and 2.1 points better than in August.
  • Spain’s 44.5 reading compared to 44.0 in August and represents a 6-month high.
  • The Greek reading of 42.2 was severely depressed but nonetheless a 4-month high.
  • Austria’s 45.1 score was at a 39-month low.
  • The Dutch reading of 50.7 was 1.0 higher than in August and at a 13-month high.
  • Ireland’s manufacturing PMI score of 51.8 was above August’s 50.9 but below July’s reading of 53.9.
  • A new source of concern despite Euroland’s slower contraction overall was an acceleration of input price inflation.

The British purchasing managers index in manufacturing slid 1.2 points to 48.4, and the third-quarter average reading of 47.7 was the lowest since 2Q09.  The U.K. Hometrack house price index slipped by 0.1% on month and 0.5% on year in September, matching August results.  British M4 money was 4.1% lower in August than a year before, and mortgage approvals totaling 47,665 in August were only 0.2% greater than July’s depressed level.

The Swiss purchasing managers index printed at 43.6 in September, down from 46.7 in August and 50.6, implying a rapid deterioration in manufacturing that surpassed analyst expectations.  Swiss retail sales volume, nonetheless, was 5.9% greater than a year earlier in August.

In the Nordic region of Europe, Sweden recorded a PMI score of 44.7, down from 45.1 in August and 50.6 in July.  The Danish manufacturing PMI fell 1.3 points to 50.1 in September. Norway’s PMI was 48.9 last month, similar to 48.8 in August and 48.7 in July. 

In Eastern Europe, Poland’s PMI of 47.0 was the sixth sub-50 reading in a row and the lowest score since July 2009.  The Czech PMI of 48.0 was down from 48.7, which was also what analysts thought the September reading would be.  Hungary’s PMI improved to 52.5 from 49.6 in August.  Russia’s score of 52.4 was above August’s 51.0 and the long-term mean score of 52.1.

Mixed signals came from China.  The HSBC PMI of 47.9 was below the 50 breakeven level and included a 40-month low in export orders.  The government-authorized CFLP manufacturing PMI came closer to reaching 50 with a reading of 49.8 after 49.2 in August.

Elsewhere in Asia, India’s PMI remained steady at 52.8.  Indonesia’s reading fell 1.1 points from a 10-month high to September score of 50.5.  Taiwan posted a 45.6, which was a half point less than August’s 46.1 and the fourth sub-50 reading in a row.  Vietnam’s 49.2 was at a 5-month high.  Turkey’s 52.2 was the fourth 50-something score in five months. 

The Bank of Japan published results of its September quarterly Tankan survey of businesses.  See my review.  The results were better than I expected and may persuade officials not to ease policy further at either of this month’s two Policy Board meetings.  Japanese motor vehicle sales swung from a 7.3% on-year rise in August to an 8.1% 12-month drop in September.

Australia’s manufacturing purchasing managers index sank lower below 50, printing at 44.1 after 45.3 in August.  The orders, output and jobs components had respective readings of 44.3, 45.5, and 40.7 in September.  MI-TD’s expected Australian inflation index accelerated to a 9-month high of 2.4% in September from 2.2% in August.

South Africa’s PMI fell nearly 5 points to 46.1 in September from 51.0 the month before.

Euroland’s jobless rate remained at a record high of 11.4% in August instead of ticking upward to 11.5% as many analysts were anticipating.  Unemployment had been 10.2% in August 2011.

Indonesian CPI inflation was 4.3% (core 4.1%) in September, down slightly from August readings.  Thai CPI inflation picked up more than expected to 3.4% last month from 2.7% in August, but core was just 1.9%. India recorded a $15.62 billion trade deficit in August, similar to its July shortfall.

More PMI reports arrive later including from the United States, where construction spending figures are also due.  Canada releases producer prices as well as the manufacturing PMI.

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

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